JAPAN Trends and Developments Contributed by: Yoshitaka Sakamoto, Tsunemichi Nakano, Hiroyuki Saga and Hiroshi Ogura, Anderson Mori & Tomotsune
Introduction Recent trends in Japan’s corporate governance include revisions to governance-related legal frame - works, specifically: (i) revisions to the Companies Act; and (ii) revisions to the Corporate Governance Code and the Stewardship Code. As for (i), revisions to the Companies Act are the first since 2019, and discussions are underway over wide- ranging revisions, centring on three key areas – that
buyout (MBO) is a type of M&A transaction in which the management, either on its own or in collabora - tion with external capital such as PE funds, acquires its company’s shares from existing shareholders to secure control.) One reason for the recent increase in such privatisations is the growing pressure on listed companies to either reconsider their market segment or go private, driven by stricter continued listing cri - teria and progress in market restructuring, both led by the Tokyo Stock Exchange (TSE). In particular, for listed companies whose fiscal year ends on March 31st, if they do not satisfy the continued listing criteria as of 31 March 2025, they will be delisted unless the deficiency is remedied during the one-year improve - ment period, making the question of whether they can remain listed even more critical. In addition, since 2023, the TSE has been urging companies – especially those with low price book-value ratios (PBRs) – to improve management with a greater awareness of capital efficiency and share price performance. These increasing burdens of listing maintenance costs and corporate governance obligations have also become factors encouraging privatisation. In addition, taking advantage of these corporate gov - ernance reforms and the TSE’s calls for improvement among low-PBR companies, so-called activist inves - tors have become more vigorous, and the number of listed companies for which unsolicited takeover pro - posals from activists represent a realistic risk is also on the rise. Such changes in the environment are also strength - ening the incentive for listed companies to bring in a trusted PE fund as a white knight or co-investor and pursue medium- to long-term value creation through privatisation. Privatisations by PE funds, which are expected to attract even greater attention going forward, may serve as a litmus test for the operation and actual implementation of corporate governance at each listed company. Revisions to the Companies Act Revisions to the Companies Act address numerous topics in line with the above three key areas. This chapter of the guide will introduce the current state
is, the ideal form of: • issuance of shares; • shareholders’ meetings; and • corporate governance.
Most recently, an interim draft was published on 23 March 2026, and the revisions will be finalised based on public comments and future deliberations. As for (ii), while the Corporate Governance Code, which was established in 2015, sets forth the prin - ciples and guidelines on corporate governance for listed companies, the Stewardship Code, which was established in 2014, defines the desirable actions and responsibilities of institutional investors. Both codes form the two pillars of the framework for corporate governance of, primarily, listed companies, setting out the code of conduct for both companies and inves - tors. Consideration surrounding the third revision of the Corporate Governance Code started in 2025, ten years after its enactment. The third revision of the Stewardship Code was published on 26 June 2025, ahead of the Corporate Governance Code. The difference between (i) and (ii) is that while (i) is broadly enforceable as a law against companies (fall - ing under what is known as “hard law”), each code constituting (ii) is principally not legally binding (falling under what is known as “soft law”). The following discussion will focus on the key points regarding the status of each revision (or deliberations on the revision). Turning to recent M&A trends in Japan, privatisation and MBO transactions backed by PE funds have become increasingly prominent. (A management
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