Recent Developments in Japanese Corporate Governance

I. Introduction
Two significant reforms to the corporate governance regime of Japanese listed companies are being implemented this Spring. Effective on May 1, 2015, the amended Companies Act has introduced a new governance structure and additional requirements relating to outside directors. Furthermore, starting June 1, 2015, the Tokyo Stock Exchange (the “TSE”) will adopt the Japanese Corporate Governance Code (the “Code”) which was developed on the initiative of the Financial Services Agency of Japan (the “FSA”).

These reforms represent a major step forward in bringing Japan’s corporate governance regime closer to the systems more widely accepted globally and which are familiar to overseas investors. Citing the “uniqueness” of Japan’s management style, Japanese firms have generally been slow to respond to overseas investors’ calls for more transparent governance. Backed by the strong political initiative of the current administration, these corporate governance reforms aim to boost investor confidence in Japanese listed firms. These reforms, particularly the Code, are also designed to foster healthy entrepreneurship by providing a framework for transparent, fair and quick business decisions, rather than restricting corporate management.

Part II of this article summarizes governance-related amendments to the Companies Act that are relevant to Japanese publicly-traded companies. Part III of this article provides an overview of the Code.

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