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Restructuring Is Considered A Performance Enhancer By Half Of Japanese Companies

Restructuring Is Considered A Performance Enhancer By Half Of Japanese Companies
According to a Reuters survey, in the midst of a drive for companies to enhance governance, around half of Japanese firms are looking at reviewing or reorganising their businesses to boost corporate value, including acquisitions.
The poll results are the most recent indication of the tangible steps that businesses in the third-largest economy in the world are trying to take to restructure their operations and increase company value.
Expectations that corporations will increase shareholder returns by unwinding crossholdings, share buybacks, and other measures have caused the Tokyo market to reach its highest point in thirty years.
The Tokyo Stock Exchange is pressuring businesses to examine how they use capital because almost half of listed companies are trading below book value. On Monday, the exchange released a list of corporations that intend to apply pressure to their less-than-stelling competitors.
The Reuters survey reveals steps under consideration, while the TSE includes businesses that have created or are exploring action plans.
Just under a third of the 104 companies surveyed stated they were considering mergers and acquisitions (M&A) as a means of combining their core businesses with other businesses, while around a quarter were considering the sale of non-essential enterprises.
A participant from the wholesale industry mentioned that their organisation was considering merging with downstream entities in order to facilitate restructuring. Its goal, according to another, is "to expand corporate scale through proactive M&A."
Nikkei Research conducted the study for Reuters between December 22 and January 12, with corporations providing responses under the condition of anonymity to enable them to speak more freely.
"Japan is entering a transformational decade. Structural change driven by new mandates from the government and TSE will optimise capital allocation," Jefferies analyst Atul Goyal previously wrote in a client note, saying Japan is poised to enter a "golden age".
Businesses surveyed the previous year reported feeling higher burdens associated with listing, and Japan witnessed a rise in management buyouts as companies sought to get away from pressure from shareholders.
Japan wants to boost household income from investments, therefore starting in January, the Nippon Individual Savings Account (NISA) programme will allow for a larger amount of tax-free investments.
A lesser percentage of companies stated they were considering buybacks or stock splits in light of the expansion, while 15% of corporations in the most recent survey stated they were considering or had already boosted dividends.

Christopher J. Mitchell

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