10 - The Japanese Stewardship Code

Summary

Japan adopted its stewardship code in 2014, and revised it in 2017 and 2020. As it paid much attention each time to the UK Code, one might initially think that Japan was following in the UKʼs footsteps. However, although the Japanese Stewardship Code and the UK Stewardship Code bear superficial resemblance, their fundamental policy objectives are almost diametrically opposed. The UK Code aims to restrain excessive risk-taking and short-termism by making institutional investors more responsible to the public. Conversely, the Japanese Code intends to champion shareholders’ interests by making domestic institutional investors more active shareholders who exert pressure on entrenched management. This divergence can also be seen in the two countriesʼ stance on ESG factors in their respective latest revisions. While the 2020 UK Code revision emphasizes the importance of environmental and social issues, the 2020 Japanese Code revision requires that consideration of ESG factors must be consistent with institutional investors’ investment strategy. Such difference in the goals of these Codes shows that caution is needed when comparing the stewardship codes of different jurisdictions.