Japan’s ruling party is preparing to put forward a plan calling for tougher enforcement of rules requiring activist investors to disclose their shareholdings, according to a senior lawmaker who spoke with Reuters.
The push comes as Japan has grown into one of the most active markets globally for activist investing outside the United States, drawing in hedge funds that have pressured corporations to boost returns, unwind cross-shareholdings, and strengthen governance practices.
Fumiaki Kobayashi, who leads a group of Liberal Democratic Party lawmakers reviewing corporate governance, acknowledged that activist investors have had a positive impact. “The presence of activists has created healthy tension for management and helped drive positive change,” he said.
However, Kobayashi also raised concerns. “But there are cases where short-term demands by some activist shareholders may discourage growth investment, and there are concerns about those who may be disregarding rules,” he said.
Kobayashi stopped short of naming any specific activist shareholders who may have broken disclosure rules. He did point to recent updates to disclosure regulations that clarified the scope of so-called deemed joint holdings — changes aimed at curbing “wolfpack” behavior, in which investors are suspected of coordinating their actions while sidestepping disclosure requirements.
“The challenge now is ensuring effective enforcement,” Kobayashi said. He added that the Securities and Exchange Surveillance Commission — Japan’s securities watchdog — should receive additional resources to investigate potential violations, including more staff and expanded use of digital tools.
When asked about situations where activist funds and private equity firms might coordinate around a corporate takeover, Kobayashi said any arrangement involving a future share transfer with a private equity firm should be included in shareholding filings. “If such arrangements were not disclosed, it would warrant stricter regulatory enforcement,” he said.
Kobayashi’s working group is expected to wrap up its proposals before the end of the month. The group is also likely to recommend changes to the framework governing shareholder proposals, including stricter requirements for submitting them and the creation of a formal mechanism allowing shareholders to introduce non-binding advisory resolutions at annual meetings.
The recommendations reflect wider concerns within the Liberal Democratic Party that while corporate profits and shareholder returns have climbed sharply in recent years, spending on capital investment, research and development, and workforce development has not kept pace.
Japanese companies faced a record number of activist proposals at this year’s general shareholders meetings. Among them was a call by Hong Kong-based Oasis Management for a vote against the leadership of publisher and gaming company Kadokawa.
Kobayashi pushed back against the idea that his group’s work represents an anti-activist agenda. He described it instead as an effort to bring Japan’s rules in line with global standards, crack down on rule-breakers, and help companies do a better job of communicating their long-term growth plans to shareholders.
