In 2026, Korea's capital market stands at an inflection point where expectations and anxieties intersect. Helped by the government's value-up policy, the index has rebounded, but heavy skepticism still lies beneath the surface. Doubts persist over whether the rise will be fleeting and whether corporations can truly undergo fundamental reform. Japan, by contrast, has ushered in the "Nikkei 50,000" era, breaking the chains of its lost three decades. Japan's success was not mere index propping. It was the triumph of a meticulously engineered "governance design" over 10 years starting with Abenomics and an "investment value chain" in which the Financial Services Agency, the exchange, and pension funds meshed like cogs. ChosunBiz meets market designers, investors, and listed companies on the ground in Japan to examine, in four parts, how Japan's value-up has evolved from "form" to "substance." [Editor's note]
At the end of last year, as the Nikkei 225 topped the 50,000 mark, the Tokyo market entered a new era. From 2015 to 2020, the Nikkei 225 was stuck in a grueling box around 20,000 for more than five years. At the time, a wry refrain dominated the market: "For Japan, 20,000 is the ceiling." Tracing a gentle uptrend from 2020 and knocking on the 20,000 wall, the Nikkei 225 entered a completely different trajectory starting in 2023. In early 2024, after reclaiming 38,915 points—the peak of the bubble economy—for the first time in 34 years, the index surged and broke through 50,000 in 2025 in one go.
Some view it as a temporary phenomenon propped up by the weak yen, but system designers describe the Nikkei's sprint as "the outcome of meticulously calculated structural change." Since 2013, the Financial Services Agency, the exchange, and pension funds have moved as one for more than a decade, beginning to show results from rewiring corporations' "management DNA."
[Stage 1] "Plant the code"... Abenomics' "arrow" that woke a dormant board
Japan's value-up began in 2013 with then-Prime Minister Abe Shinzo's so-called "third arrow (growth strategy)." At the time, Japan's economy was mired in the quagmire of a "lost 20 years," with corporations hoarding cash in their coffers and halting investment. The Abe administration's solution was clear. Rather than browbeating corporations directly, it would change the "rules" that govern capital flows and make the market move on its own.
The first button, the 2014 "stewardship code," imposed fiduciary duties on big players such as pension funds to "engage intensively with corporations as shareholders." In particular, as Japan's public pension (GPIF) made compliance with this code a core metric in selecting external managers, managers morphed into powerful "catfish" that pressured corporations to reform their corporate constitution.
Then in 2015, the "corporate governance code" was introduced, handing boards the assignment to "explain if you fail to deliver efficiency." It aimed to reduce policy-oriented cross-shareholdings (shares held mutually by corporations to maintain or strengthen relationships with counterparties rather than for investment purposes) and mandated appointing at least two outside directors to break away from rubber-stamp boards. These two codes became the twin wheels supporting Japan's value-up, laying the groundwork for a drive of more than 10 years.
[Stage 2] "Upend the board"... The exchange: "A PBR below 1 is shameful"
In March 2023, 10 years after laying the foundation, the Tokyo Stock Exchange made a historic decision. It officially asked listed companies with a price-to-book ratio (PBR) below 1 to "discuss at the board and improve why the firm's value is lower than its liquidation value." This is the so-called "management conscious of cost of capital and stock prices" project.
It was not mere guidance. The exchange publicly disclosed, each month with transparency, the list of corporations that filed improvement plans. Watanabe Koji, head of listings at the Tokyo Stock Exchange (TSE), called it "peer pressure." It leveraged a distinctly Japanese mindset that "if everyone else is doing it and we don't, we'll be branded as backward." This fundamentally shook management's checkbox mentality.
The effect was immediate. As of last year, 91% of Prime Market listings responded to the exchange's value-up request and joined the disclosures. The market's overall constitution also changed. The average PBR in the Prime Market climbed from 1.1 in 2022 to 1.4 last year, and the chronically undervalued Standard Market improved from 0.7 to 0.9, putting it on the verge of "PBR 1."
In the Prime Market, the share of corporations with a PBR below 1 fell from 50% to 44% over the same period, and those with a return on equity (ROE) below 8% declined from 47% to 43%. From large blue chips to domestic-oriented small and midsize firms, the market as a whole began collectively shedding the yoke of being "below liquidation value."
In 2022, the Tokyo Stock Exchange also reorganized its five existing markets into three: Prime, Standard, and Growth. The Prime Market is the top-tier market that prioritizes dialogue with global investors and applies the strictest listing and maintenance criteria. The Standard Market is for corporations oriented to domestic demand with sufficient liquidity and governance standards to qualify as investable. The Growth Market is defined as a market centered on startups with high growth potential.
As corporations that had flowed excessively into the former Prime Market shifted to the Standard and Growth markets, qualitative growth took place by segment. As listing thresholds rose, the number of new listings on the Prime Market fell and delistings increased. However, thanks to the market's restructuring around higher-quality corporations, total market capitalization grew.
[Stage 3] "Speak in numbers"... 20,000 engagements lifted market cap by 6.2%
If the government drew up the blueprint called value-up, Japan's public pension (GPIF), the world's largest pension fund, was the most powerful "hand of execution" capable of cutting off the capital lifeline of corporations that refused to move according to that blueprint.
GPIF's report, "Engagement impact analysis," sent shock waves through the capital market. The report statistically analyzed five years of 26,792 instances of corporate engagement data accumulated through 21 external managers.
According to the report, corporations that engaged deeply with investors on "board structure and self-assessment" saw their market capitalization rise by an average of 6.2% more than those that did not. In particular, the market delivered immediate valuation re-ratings for corporations that increased the share of independent outside directors and discussed greater transparency in board operations.
It was not just stock prices rising. Corporations that pursued active dialogue showed clear improvements in ESG indicators, such as setting greenhouse gas reduction targets. The data demonstrated that value-up captured both rabbits at once: corporate reform and higher stock prices.
Hirano, a fund manager at Japan's SPARX Asset Management, said, "If in the past Japanese CEOs were preoccupied with bulking up revenue and headcount, they now feel a real sense of crisis that they will be weeded out if they fail to deliver capital efficiency (ROE). As the data proved effectiveness, long-term funds from global heavyweights that had shunned the Japanese market began pouring into Tokyo."
[Stage 4] "Wealth transfer"... The virtuous-cycle blueprint that completed Japan's "money move"
Reform does not stop. The Financial Services Agency of Japan (JFSA) is leading the "Action Programme for Corporate Governance Reform 2025," which now aims to "expand from formal compliance to value creation." Beyond merely creating systems, it signals the will to track to the end how those systems actually function on corporate floors.
The Financial Services Agency is phasing in mandatory English disclosures to eliminate information asymmetry with global investors and is building a system that holds all asset owners—including insurers and banks, not just pension funds—responsible as shareholders. From corporations' perspective, they are effectively surrounded by investor scrutiny and engagement requests.
The final period in the design is household money totaling 2,200 trillion yen (about 20 quadrillion won). The Japanese government has played a bold card called the new NISA (tax-exempt small investment account). By sharply raising tax-free limits and making the period permanent, it is inducing a "money move" that draws the public's mattress deposits into the stock market.
An official at the Financial Services Agency of Japan said, "Value-up should not be simple stock-price support; it must aim to contribute substantively to sustainable corporate growth and higher corporate value over the medium to long term," adding, "The government will support corporate activity, corporations will drive economic growth, and we will build a structure in which all citizens share in the fruits of that growth."