Government Using Japan's Low PBR Reform as a Standard... Focus on 'Three' Success Factors

Local stock market experts have analyzed the factors behind the success of Japan's low PBR (price-to-book ratio) reform, which our government uses as a benchmark.

Major factors cited include the Japanese cultural emphasis on maintaining face, the attitude of being a latecomer, and the powerful influence of the stock exchange. However, since Japan's success factors do not necessarily apply to Korea, it was also pointed out that measures tailored to the Korean situation need to be developed.

Ryushiro Kodaira, senior financial reporter at Nihon Keizai Shimbun, identified three main factors behind the success of the Tokyo Stock Exchange (TSE)'s "low PBR reform" policy at a seminar held on the 19th at the International Finance Center (IFC) in Yeouido, hosted by the Korea Corporate Governance Forum.

The low PBR reform implemented by the Tokyo Stock Exchange in March last year serves as a benchmark for the corporate value-up program that the Korean government will announce on the 26th. The Tokyo Stock Exchange required listed companies with a PBR below 1 to disclose improvement policies and specific implementation targets aimed at enhancing capital profitability and growth potential. A PBR below 1 means that the company's value is priced lower than its net assets.

This measure is evaluated to have contributed to the Nikkei 225 index approaching a 34-year high, gaining favorable responses from foreign investors. Senior reporter Kodaira said, "In Japan, when a company in the same industry announces a good plan to enhance shareholder value, other companies in the same sector follow suit," adding, "otherwise, their face would be lost." The Tokyo Stock Exchange captured this corporate practice and encouraged value enhancement. He continued, "Japanese companies are better at following very good forms and best practices rather than expressing their own opinions," and analyzed that "the Tokyo Stock Exchange presented exemplary cases and good templates well."

The significant influence of the Tokyo Stock Exchange on individual companies was also cited as a success factor for the low PBR reform. He said, "Among the 18 CEOs since the establishment of the Tokyo Stock Exchange in 1949, six came from major investment banks (IBs) such as Nomura and Daiwa Securities," adding, "They hold tremendous influence in the Japanese market and raise their voices with financial authorities."

Senior reporter Kodaira also explained that the cultural characteristics of Japan allow for rapid stock market reforms. He diagnosed, "Many Japanese people follow authoritative institutions like the Tokyo Stock Exchange well, and I think Korea is similar in this regard."

Regarding the Korean government, he advised, "If the face culture and the authority of the stock exchange do not work in Korea, formalizing everything and embedding it into corporate culture might be an effective strategy." He also said, "if stricter regulations and rules are considered more effective in Korea, the Korean stock exchange should establish stricter and clearer regulations to apply to listed companies."

This content was produced with the assistance of AI translation services.