A new revision to Japan¡¯s corporate governance code may free up some of the $840 billion in cash held by listed companies and drive another wave of Japanese stock market buying.
The Financial Services Agency will present to an expert panel Thursday draft rules that would require firms to verify that they are using cash effectively, with the aim of rolling out the change this year. While the code isn¡¯t legally binding, it has a substantial impact on corporate behavior.
Despite significant improvement in corporate governance in recent years, mountains of unused cash have been piling up on Japanese company balance sheets. Diverting this to higher-yielding returns may make the nation¡¯s stocks more attractive to investors.
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