Investor concern is rising that Japan's corporate governance reforms may be losing momentum, potentially threatening a key driver of foreign inflows and the stock market rally, Bloomberg News reported Friday.
Draft revisions to the Corporate Governance Code and proposed Companies Act amendments have drawn criticism from some investors, who say the changes favor corporate interests and weaken reform efforts, according to the report.
AllianceBernstein Japan's Haruna Usui warned of a "reversal" in governance reform as companies push back against activist demands for higher shareholder returns, the report said.
Investors have focused on whether companies would be required to improve cash management, though recent discussions suggest such measures may remain nonbinding, according to the report.
Nomura Securities' Kazuya Nakagawa said the latest draft reduces compliance items and risks being viewed as a step backward, while Asian Corporate Governance Association co-founder Jamie Allen criticized the proposals for placing too little emphasis on capital management. Some investors, however, said shareholder pressure should continue to support governance reforms, the report said.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)