We typically provide you updates on our engagement strategy as well as bottom-up developments as we believe that our unique engagement approach works regardless of the macro picture. However, we would like to flag two very interesting top-down trends during the last six months in regards to shareholder activism by locals in Japan.
The first was an Economist article (What Warren Buffett sees in Japan Inc) on Warren Buffett’s recent dramatic investment into the five Japanese trading houses. Warren Buffett’s $6.5bn investment is the largest outside the US and so eye catching as this is something that Berkshire Hathaway hasn’t done in Japan in as far as we can remember. A key excerpt from the article states:
“…method in Mr Buffett’s madness. As he admitted in 1998, his view on Japan could change if managers became “more shareholder responsive”. In recent years they have, even in the trading houses…”
The second was an interesting FT article related to our space on Japan shareholder activism. We are, of course, not involved in hostile activism as it is our view that our engagement approach is much more effective (read more on our approach here), but this gives some colour on the changing environment as there is a clearly an irreversible trend towards better corporate governance. Our opinion is that the whole perception of corporate governance and activism has changed amongst both local institutional investors and company management in Japan rather than necessarily being driven by foreign activists.
The FT article: Japan’s icy climate for hostile takeovers starts to thaw, discusses the easing of opposition to unsolicited bids as local advisers seek out new deals:
“ Established Japanese companies have recently mounted unsolicited bids for domestic businesses, helping to erode an accusation that such moves are the preserve of foreign vultures”