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Japan – governance code compliance strengthens

Compliance with the  Japanese corporate governance code of 2015 shows strong compliance according to research published by the  Tokyo Stock Exchange (TSE).

The Code contains five general principles, 30 principles, and 38 supplementary principles and like the UK code a “comply or explain”approach has been adopted in respect of how companies comply. Analysis of compliance against the code found that in general the larger companies comply with more principles.

Japan governance code Tokyo Stock Exchage

Japan Governance Code shows progress according to Tokyo Stock Exchange

As of 31st December 2016 2,530 companies listed on TSE First Section and TSE Second Section had disclosed their response to the Code and that 19.9% of companies had complied with all 73 principles, the research found. Further analysis showed that 64.8% had complied with at least 90% of all principles, which the TSE said meant that they had explained the reasons of non-compliance with no more than seven out of 73 principles.

Looking at just the 2,002 TSE First Section companies, 24.2% of companies complied with all principles, and 65% of companies complied with at least 90% of all principles. Meanwhile, of the 528 TSE Second Section companies, 3.6% of companies complied with all principles, and 63.8% of companies complied with at least 90% of all principles, which indicated that TSE First Section companies tended to comply with more principles than TSE Second Section companies.

However, among the JPX-Nikkei 400 companies, the percentage of companies complying with all principles was 48.7%, which the report pointed out is significantly higher than TSE First Section and TSE Second Section total. Analysing the companies by market sector the research found that the ratio of companies that complied with all principles was highest for banking (80.2%), followed by insurance (55.6%), air transportation (40.0%), and electric power & gas (39.1%).

Chapter one of the requires listed companies to secure effectively the rights and equal treatment of shareholders. The research found that 60.7% of listed companies stated that they dispatch convening notices for general shareholders meetings earlier with , 520 companies stating they dispatched convening notices approximately three weeks prior to the general shareholders meeting, while 25 companies stated their notices were dispatched about four weeks in advance.

The analysis found that larger companies and those with higher foreign shareholding ratios are more likely to send out the notice of their annual general meeting early with early notification being defined as companies that send out notices three or more business days earlier than the statutory notification deadline.  It was found that of the JPX-Nikkei 400 companies, 87% of them dispatched the notices well in advance  compared with 74.4% of companies listed on TSE First Section and 52.3% of the TSE Second Section.


The exercise of voting rights by electronic means has been permitted, subject to a resolution by the company board. The research found that  33.1% of TSE-listed companies up from 21.7% from the last survey relating to the period to the end of July 2016.

In analysis by market division, companies allowing the exercise of voting rights by electronic means accounted for 47% of TSE First Section companies, which was high compared with TSE Second Section (10.9%) companies. In case of JPX-Nikkei 400 companies, 84.8% allowed electronic voting rights exercise, marking a much higher ratio than that of TSE First Section (47%).

Meanwhile 24.1% of all listed companies state that they use electronic voting platforms for institutional investors. Among JPX-Nikkei 400 companies, 80% of companies use electronic voting platforms compared with 37.9% of TSE First Section companies.

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