There is a shared shift behind the attention on Japanese corporations' "value-up." Instead of rolling out policies to prop up share prices, they are changing the decision-making structure inside the corporations.
This contrasts with Korean listed companies, which are fixated on "showy prescriptions" like simply raising dividends or canceling treasury stock. For Japanese corporations, value-up has taken root as a modernization of the decision-making process that uses capital efficiency as the top criterion for management judgment, going beyond merely hitting key performance indicators.
Based on remarks from an official at Japan's Financial Services Agency met on the 21st of this month, and from the management of Mitsubishi UFJ Financial Group (MUFG) and Asuka Pharmaceutical Holdings, on the ground at Japanese corporations, enhancing corporate value was being handled not as a "performance metric" but as the task of resetting the "standard for management judgment."
◇ MUFG asks, "Why are we holding this asset?"
The value-up trend in Japan began first among large companies and the financial sector. MUFG, Japan's largest financial group, sees the key to 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 management is less a target to achieve than a decision-making standard that determines whether to keep or exit a business or asset.
The starting point for change was the question. It began with fundamental questions like "Why are we holding this stock?" and "Does this asset exceed the cost of capital?" Assets that could not yield clear answers became immediate candidates for disposal. MUFG applied a profitability metric called return on risk-weighted assets (RORA) even to cross-shareholdings (policy-holding shares) that had been held by custom, and set a principle to sell them regardless of transactional relationships if they fall 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 demand that listed companies reduce their cross-shareholdings (policy-holding shares)," adding, "Instead, we require boards to self-check each year, for each equity, whether there is a need to continue holding it from the perspective of the cost of capital." Rather than forcing reductions, the idea is to formalize the basis for judgment as a board agenda item so that companies change on their own.
MUFG presented a roadmap to sell about 700 billion yen of strategic equity by this year. While 88% of its strategic equity portfolio currently exceeds internal profitability benchmarks, assets that fall short are being reduced step by step. The company described this as "a capital recycling process that cleans up low-return assets and reallocates them to high-return businesses."
In setting standards for capital allocation, the board and human capital strategy were also revamped. 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, to strengthen diversity and independence in decision-making. It also set a goal to raise the ratio of female managers to 30% by 2030. MUFG defines strengthening human capital not merely as part of ESG but as investment in management infrastructure to lift ROE over the long term.
Portfolio restructuring was pursued in parallel. After selling Union Bank in the United States, the company is reexamining its overseas businesses across the board and pushing a strategy that connects digital and even nonfinancial areas centered on partner banks in Asia. In Japan, it is moving away from a growth model reliant on expanding the balance sheet to focus on solid management that raises the share of fee revenue and slims the expense structure.
An MUFG official said, "ROE is not a performance target; it is a standard for deciding which businesses to keep and which assets to dispose of," adding, "Rather than putting the number first, we changed the management structure so that the number actually operates in decision-making."
◇ Asuka Pharmaceutical Holdings opens management's "ears"
Changes on the ground among mid-sized companies are even more dramatic. The disclosure released by Asuka Pharmaceutical Holdings 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 continuously since 2018," and self-diagnosed three causes (failure to convey growth strategy, lack of IR, unclear cash allocation).
The key to change was opening management's "ears." Asuka Pharmaceutical shares routine IR interview content with management and built a system to formally report investor feedback to management every quarter. In practice, IR interviews surged nearly threefold from just 41 in 2019 to 117 in 2024.
An Asuka Pharmaceutical official said, "Through this process, management's awareness shifted from 'explaining results' to 'share price and cost of capital,'" adding, "Whereas past investor questions focused on results or drugs under development (pipeline), recently the focus has been 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) singled out Asuka Pharmaceutical's "transparency in cash allocation" as a strong point. It specifically discloses 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.
Asuka Pharmaceutical decided to reduce cross-shareholdings to below 20% of net worth. It invested part of the cash from these sales to acquire equity in local pharmaceutical companies in Vietnam and the Philippines. The company described this as "a decision to convert dormant capital into growth capital."
It also overhauled its shareholder return policy. In 2023, it doubled the dividend per share to 40 yen from 20 yen, and from 2024 it adopted a principle of a 30% payout ratio. It also set a minimum dividend standard guaranteeing 30 yen per year regardless of share price movements.
Portfolio restructuring was pursued in parallel. It shifted its center of gravity from a low-margin, generic (copy drug)-focused structure to obstetrics and gynecology-specialized new drugs, and in the process achieved the ROE 8% target a year early. Asuka Pharmaceutical Holdings' PBR is now above 1x.
◇ "Disclosure channels must be strengthened… united public-private moves proved effective"
Lee Seok-hun, a research fellow at the Korea Capital Market Institute, found differences between Japan and Korea in the "intensity of pressure" and "channel perception" of disclosures. He said, "Japan made the corporate governance code concrete and makes it clear to the market whether each item was actually disclosed," diagnosing that "the substantive pressure 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 but do not share with the market specific utilization plans or analyses of the cost of capital. From shareholders' perspective, it inevitably looks as if corporations are merely piling up cash and neglecting "capital efficiency."
He then emphasized policy consistency. He said, "It was also important that the exchange, the Financial Services Agency, the government, and public pension funds moved in the same direction," analyzing that "as leading companies proactively moved to disclose first, the 'peer effect' among companies in the same industry was maximized."
In contrast, even though Korea frequently makes decisions to spin off key business units through physical or company split-ups and pursue dual listings, what stands out compared with Japan is the lack of specific disclosures in this process on protecting the rights and interests of minority shareholders or enhancing corporate value.
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 strong character of after-the-fact reporting," adding, "A structure is needed in which companies are monitored by shareholders through disclosures and, in that process, companies are driven to change."