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the japanese stock market has seen a historic rally in the first half of this year, which is due not only to the boost from the macro environment, but also to the commitment of listed companies to improve their corporate governance models.

a campaign launched by the tokyo stock exchange last year to get japanese companies to pay more attention to corporate governance and shareholder relations has also prompted overseas analysts to give optimistic guidance on japanese stocks.

however, according to nippon life insurance co., one of japan's largest institutional investors, less than a third of japanese listed companies that have pledged to comply with the tokyo stock exchange's requirement to disclose business improvement plans have provided detailed and concrete action strategies.

tomochika ishii, general manager of the equity investment department of nippon life insurance company, sarcastically said that many companies are just discussing it enthusiastically but have not made any actual disclosures.

about 79% of japanese companies listed on the tse's main market, or main board, responded to the exchange's request as of august, the data showed, but nippon life insurance co. found that only 29% had made plans.

at the same time, this is also implicitly confirmed by the return on equity of listed companies. as of now, the return on equity of dongzheng stock price index companies remains at around 8%, far lower than its global peers.

spring for small-cap stocks

although the road to reform is still long and arduous, nippon life insurance company also believes that the reform will bring more tailwinds to the japanese stock market and calls on the authorities to make it a reality as soon as possible.

drew edwards and colin bekemeyer, investment managers at gmo, another investment firm, have observed that regulators are turning their attention to small-cap stocks, urging them to achieve higher returns.

the tokyo stock exchange recently asked companies to disclose plans to improve their price-to-book ratios and return on equity, especially those with price-to-book ratios below 1 and return on equity below 8%, most of which are small and mid-cap stocks.

edwards and bekemeyer explained that there has long been a practice in japanese business circles whereby smaller companies wait for larger companies to make the first move before following suit.

but the trend has come, which will drive small-cap stocks to join the reform, thereby greatly increasing their valuations. the two also believe that due to the relatively low valuations of small-cap stocks, this will create more favorable entry conditions for investors.