Report by Yuka Marosek

Yuka Marosek discusses the structural shift in Japan’s corporate landscape following the Tokyo Stock Exchange’s statement earlier this year discouraging parent-subsidiary listings. These structures have come under increased scrutiny due to governance concerns - subsidiaries often prioritise parent interests, limiting minority shareholder influence and strategic independence. The recent backlash to Toyota’s undervalued tender offer for Toyota Industries underscores investor frustration. Yuka presents a curated list of potential delisting candidates and notes that over 80% of such delistings in the past five years have resulted in share price gains.

Consumer Discretionary

Report by LightStream Research

Mio Kato provides his take on the crossholdings sell-down - the trend of governance reform in Japan continues with Toyota, Toyota Industries and Aisin selling shares of Denso. Denso is buffering some of the flow impact by repurchasing roughly half of the shares to be sold. While the size of these moves is relatively large, Mio believes their impact could be disproportionately large for the market as a whole. He considers this to be further confirmation of the relatively positive backdrop for asset allocation away from China and into Japan, especially in the long-term.