In mid-April, Japanese Prime Minister Shinzo Abe appointed
two new members to the Bank of Japan policy board: Goshi
Kataoka, an economist at Mitsubishi UFJ Research &
Consulting, and Hitoshi Suzuki, an executive at the Bank of
Tokyo-Mitsubishi UFJ. If they are approved, they would round
out a nine-member board that supports monetary stimulus, an
integral part of Abes three-pronged approach to reviving
Japans economy, dubbed Abenomics.
The third arrow of Prime Minister Abes
efforts includes corporate governance reform, such as
diversifying the makeup of corporate boards to include outside
directors. Athough many parts of the campaign to return Japan
to 2 percent inflation have had limited success, some analysts
see changes taking shape.
Weve seen more and more Japanese companies
improving shareholder return, especially through share buybacks
and dividends, says Katsushi Saito, head of Japan equity
research at Nomura. Also, profitability indicators like
ROE have become [key performance indicators] of more companies
Nomura and Mizuho Securities Group tie for first place in
the first-ever team-based ranking of Institutional
Investors All-Japan Research Team survey. More than 1,100
investors who collectively manage $1.5 trillion in Japanese
equities and $1 trillion in Japanese fixed-income voted for the
top analysts in 27 industry sectors, five macro disciplines,
and two new fixed-income sectors. Participants voted for
individual analysts, and the votes were combined to form a
firms team ranking in each sector.
In the individual-analyst ranking, Mizuho tops the
leaderboard for the fourth consecutive year, with 32 total team
positions, 11 of which are first place. Nomura maintains second
place with 29 total team positions, and SMBC Nikko Securities
takes third with 25 positions.
The Trump Effect Extends Across the
Clients have been naturally concerned about the possible
effects of Donald Trumps presidency on the global
markets, says Yohei Osade, Mizuhos global head of Asian
equity research, specifically on the yen-dollar exchange rate,
which can affect corporate earnings.
At Mizuho we revisit our forex assumptions every three
months and, when necessary, adopt an agile approach to update
our bottom-up analyst forecasts, Osade says.
Hisashi Moriyama, head of Japanese equity research at J.P.
Morgan, agrees that geopolitics has been a major focus for
investors at this stage. That said, underlying economic
data continues to be supportive of a growth outlook, he
adds. At J.P. Morgan we continue to focus on economic and
corporate fundamentals, which [are] ultimately the sustainable
driver for markets and share prices. J.P. Morgan advances
to sixth place in the analyst ranking, up from 11th last year.
Over the past year, Moriyama says, the firm hired Ryota
Sakagami, chief Japan equity research strategist, plus two new
analysts covering banks and health care.
Improvements Still Needed
The sell side could improve by beginning to provide relative
rankings of corporate transparency within sectors, as well as
thoughts on how companies have changed over time, says one
voter at a U.S.-based investment firm.
Analysts have unparalleled perspective on how these
companies have changed, but we usually only hear of results. We
would like to hear about how corporate direction and priorities
have changed, the voter explains. (II keeps the
identities of voters confidential unless instructed
Disclosure among Japanese firms is also improving in light
of Prime Minister Abes reforms, says Takaaki Muramatsu,
director of research at SMBC Nikko Securities, which took third
place in the team-based ranking. He adds that M&A and
changes to companies business mix are also changing the
definition of the traditional Japanese sectors. SMBC
analysts are having to collaborate more than ever as a result,
As disclosures continue to diversify, investors are also
broadening their field of view, says Osade, becoming
increasingly interested in longer-term corporate value and
factors such as ESG.
Overall, we are being forced to re-analyze the
input/output equation, an endeavor that very much tests the
mettle of equity analysts, Osade says, noting that Mizuho
remains focused on two key factors: underlying intrinsic value
and clear communication with clients.