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When activist investor Oasis Management called for changes in Japan’s consumer goods giant KAO (which proposes reforms to the boardroom through elections of external directors and long-term incentives), the response was clear and decisive. Shareholders rejected all of Oasis’ proposals at their latest annual meeting. It was a calm reminder that even the strongest activists often fail to overcome the traditions of Japanese corporates.
However, resistance remains strong, but the momentum behind activist investment is accelerating. According to Bloomberg data, the country was the second most active market for activist investment last year, with around 150 campaigns, up nearly 50% year-on-year. The Japanese government and regulators have in recent years become an unexpected ally of shareholder activity, urging businesses to prioritize profits and transparency. The Tokyo Stock Exchange has also introduced rules that put pressure on underperforming companies to increase capital efficiency.
Activists such as Elliott’s investment management are particularly busy, targeting companies such as Mitsui Fudosan, Tokyo Gas and Dai Nippon Printing. Elliott is reportedly making a significant investment in local real estate developer Sumitomo Realty & Development. These moves often paid off. Sumitomo Realty’s stock has reached almost fifth place in the past month. KAO’s stock was the fifth most in the past year despite resisting the Oasis campaign, and was partially fueled by the hopes of activist-led reform. Reform seems to be getting stronger from afar.
However, beneath the surface remains an ideological conflict between the logic of the global market and its established corporate value. Activist investors tend to view undervalued Japanese companies as inefficient and in need of sharper governance and better capital allocation. Domestic campaigns typically focus on practical changes, selling legacy assets, starting stock buybacks, and reducing cross-share holdings.
On the other side, there is a corporate culture that seeks to avoid conflict with local shareholders. In many Japanese companies, ownership is controlled by mutually linked shareholders, including banks, suppliers and business partners whose profits match the management team. These stakeholders tend to vote defensively, protecting their leadership from external pressure. Meanwhile, local retail investors often move away from the activist agenda and support longtime executive stability even when performance is slow. Activists, especially foreigners, are often cast as short-term opportunists and accused of seeking quick profits.
Today’s Japanese company models are marked with unused assets and low fair returns, exposing them to an increased tension. In a world where growth slows and domestic demographics are reduced, standing still may prove to be more dangerous than reform.
june.yoon@ft.com
