There is a common shift behind the spotlight on Japanese corporations' "value-up." Instead of rolling out policies to prop up stock prices, they are changing the internal decision-making structure itself.
This contrasts with Korean listed companies that are fixated on "showy prescriptions," such as simply raising dividends or canceling treasury shares. For Japanese corporations, value-up has taken hold not as a mere exercise in hitting key performance indicators but as a modernization of the decision-making process that puts capital efficiency at the top of management's criteria.
Based on remarks on the 21st from an official at Japan's Financial Services Agency, and officials at Mitsubishi UFJ Financial Group (MUFG) and ASKA Pharmaceutical Holdings, corporate value enhancement on the ground in Japan was being treated not as a "performance metric" but as a matter of resetting the "standard for management judgment."
◇ MUFG, asking "why hold this asset"
The value-up trend in Japan began first among large corporations and the financial sector. MUFG, Japan's largest financial group, sees the core of boosting corporate value in the ability to explain "how capital is being used." The medium- to long-term "return on equity (ROE) 12%" set by MUFG's management is less a target to achieve than a decision-making threshold for whether to retain or exit businesses and assets.
The starting point of the change was questions. It began with fundamental questions such as "Why are we holding this stock?" and "Does this asset exceed the cost of capital?" Assets that could not be answered for clearly were immediately slated for disposal. MUFG applied a profitability yardstick, the return on risk-weighted assets (RORA), even to cross-shareholdings (policy holdings) it had held as a matter of custom, and set a principle of selling them regardless of transactional relationships if they fell below the cost of capital.
This aligns with the design of the financial authorities. An official at the Financial Services Agency met on the 21st said, "We do not directly tell listed companies to reduce cross-shareholdings (policy holdings)," adding, "Instead, we require boards to self-check each year, from the perspective of the cost of capital, whether it is necessary to continue holding each equity." Rather than forcing reductions, the idea is to formalize the basis for judgment as a board agenda item and induce change from within.
MUFG has presented a roadmap to sell about 700 billion yen worth of strategic equity by this year. While 88% of the current strategic equity portfolio exceeds internal profitability benchmarks, assets that fall short are being reduced in stages. The company described this as "a capital recycling process that cleans out low-return assets and reallocates to high-return businesses."
In the process of setting standards for capital allocation, the board and human capital strategy were also refined. MUFG's board consists of nine outside directors, all of whom are independent, and includes experts in finance, accounting, law, global, and digital fields as well as female outside directors, strengthening diversity and independence in decision-making. It also set a goal to raise the share of female managers to 30% by 2030. MUFG defines strengthening human capital not just in terms of ESG but as investment in management infrastructure to raise ROE over the long term.
Business portfolio reorganization was carried out in parallel. After selling U.S. Union Bank, the company is reexamining its overseas operations across the board and is pursuing a strategy that connects digital and even non-financial areas around partner banks in Asia. In Japan, it is moving away from growth that relied on expanding the balance sheet and is focusing on solid management that raises the share of fee revenue and slims down the expense structure.
An MUFG official said, "ROE is not a performance target but a standard for deciding which businesses to keep and which assets to exit," adding, "Rather than leading with numbers, we changed the management structure so that those numbers actually drive decisions."
◇ ASKA Pharmaceutical Holdings opens management's "ears"
The changes on the ground at mid-sized companies are even more dramatic. The disclosure ASKA Pharmaceutical Holdings released in Nov. 2023 was effectively a "self-reflection letter." Management said, "ROE has exceeded 8% for three consecutive years, but PBR has remained below 1x since 2018," and self-diagnosed three causes (failure to convey growth strategy, insufficient IR, unclear cash allocation).
The core of the change was opening management's "ears." ASKA Pharmaceutical shares routine IR interview content with management and has built a system to formally report investor feedback to management each quarter. In fact, IR interviews, just 41 in 2019, surged nearly threefold to 117 in 2024.
An ASKA Pharmaceutical official said, "Through this process, management's focus shifted from 'explaining results' to 'stock price and cost of capital,'" adding, "Whereas investor questions in the past centered on results or drugs in development (pipeline), recently the discussion has centered on R&D and sales strategy including overseas license in-and-out and on overseas business strategy from a medium- to long-term perspective."
The Tokyo Stock Exchange (TSE) cited ASKA Pharmaceutical's "transparency in cash allocation" as a strong point. The company discloses in concrete terms how cash from operating activities and funds secured by selling cross-shareholdings will be allocated to growth investment, strengthening the management base, and shareholder returns.
ASKA Pharmaceutical decided to reduce cross-shareholdings to below 20% of net worth. It invested part of the cash from those sales to acquire equity in local pharmaceutical companies in Vietnam and the Philippines. The company called this "a decision to convert idle capital into growth capital."
The shareholder return policy was also overhauled. In 2023, the dividend per share was doubled from 20 yen to 40 yen, and starting in 2024, a 30% payout ratio principle was introduced. The company also set a minimum dividend floor guaranteeing 30 yen per year regardless of stock price trends.
Business portfolio reorganization was carried out in parallel. The company shifted its center of gravity from a low-margin generics-focused structure to obstetrics and gynecology-focused innovative drugs, and in the process achieved its 8% ROE target a year early. ASKA Pharmaceutical Holdings' PBR is now above 1x.
◇ "Disclosure channels must be strengthened… a one-team push by the public and private sectors proved effective"
Lee Seok-hun, a research fellow at the Korea Capital Market Institute, traced the differences between Japan and Korea to the "pressure level" and "channel perception" of disclosure. He said, "Japan has made its corporate governance code concrete, making it clear to the market whether each item has actually been disclosed," and assessed that "the substantive pressure exerted on disclosure is far stronger than in Korea."
For example, while Japan's MUFG transparently discloses its "capital recycling" process of selling low-return equity and reinvesting in high-return businesses, many listed companies in Korea hold massive cash-like assets yet do not share with the market concrete utilization plans or analyses of the cost of capital. From shareholders' perspective, it inevitably looks like corporations are just piling up cash and neglecting "capital efficiency."
He went on to stress policy consistency. He said, "It also mattered that the exchange, the Financial Services Agency, the government, and pension funds moved in the same direction," and analyzed that "as leading corporations proactively stepped up on disclosure first, the peer effect among companies in the same industry was maximized."
By contrast, in Korea, even though decisions such as spinning off core business units into physical and in-kind divisions and dual-listing them are frequent, the lack of specific disclosures on protecting the rights and interests of minority shareholders or on corporate value enhancement during these processes stands in contrast to Japan.
He also pointed out differences in perceptions of disclosure. The research fellow said, "Disclosure is originally a communication channel with investors, but in Korea, disclosure still has a largely ex-post reporting character," adding, "We need a structure in which companies are monitored by shareholders through disclosure and, in that process, are driven to change."