Tighter requirements to stay on the Tokyo bourse's prestigious main board are forcing Japanese companies to cease long criticised practices such as cash-hoarding and cross shareholdings, even as some investors call for tougher reform.
Stricter rules for liquidity - market capitalisation in tradable shares of at least 10 billion yen with a tradable share ratio of 35per cent or more - are especially tough for small caps firms or those largely owned by parent companies or business partners. Similarly, chemicals trading firm Soda Nikka Co announced its largest-ever share buybacks and pledged to raise its payout ratio target to 40per cent from 30per cent.
The longstanding practice has been criticised as creating a cozy relationship between management and large shareholders, though the percentage of such shareholdings have halved to less than 15per cent in two decades, according data from Nomura Institute of Capital Markets Research. But some investors said the new criteria are still too lax to make much impact, noting the reform's initial ambition was to narrow down to some top 500 firms for TSE's Topix index, which currently includes all the companies listed on the main board.