Japan’s equity market sits in the middle of a policy led transition rather than a short, sentiment driven bounce. In March 2023 the Tokyo Stock Exchange (TSE) asked listed companies to run “management conscious of cost of capital and stock price.” By July 2024, 86% of Prime Market companies had disclosed plans; by July 2025, multiple follow ups put that figure around 91%, a meaningful shift from guidance to practice
Corporate actions are already visible. Share buyback authorisations hit a record in 2024 - about ¥18.0 trillion by one tally, and firms were net buyers of their own shares on a scale not seen in prior years. These are not anecdotes; they are balance sheet policy choices that tighten the link between cash generation and per share value.
Flows are shifting as well. Japan’s permanent, expanded NISA regime has broadened tax advantaged equity ownership. Regulators indicated purchases of roughly ¥18 trillion in 2024 and another ¥6 trillion in the first quarter of 2025; account holders reached about 26–27 million by end March 2025. That is a broad base for incremental domestic demand. In parallel, households still keep a notably high share of financial assets in cash and deposits - leaving room for rotation as inflation and wages normalise.
Wage dynamics are no longer a headwind. The 2025 shuntō (traditional spring wage bargaining round) concluded with average negotiated increases of ~5.25%, the strongest in three decades, bolstering the case for a durable shift from precautionary savings to long term investment.
None of this eliminates risk; it changes its shape. Policy credibility, corporate follow through and flow patterns rarely move in lockstep, which means dispersion across sectors and capital structures should remain high. For allocators, the implication is straightforward: entry during the implementation phase captures more of the governance to valuation transmission.
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