In aggregate, the long process of balance sheet repair in Japan is well and truly over. Arguably for many companies, balance sheet health is “too strong” which points to a level of inefficiency. In fact some companies are now focused on improved capital efficiency, generating significant cash flow, and applying renewed balance sheet strength to pursue sensible expansion strategies.

Since the introduction of Abe’s reflationary policies, we have observed a shift in broad market expectations of mild deflation to expectations for inflation in Japan. A change in this economic imperative for domestic investors has increased their required returns amid even a mild inflationary environment.

Increased ownership of equities has sparked a rising focus on governance from domestic investors in order to “unlock value”.

Encouragingly for shareholders, more companies are returning value in the form of dividends and buybacks. There is a large scope for improvement but this change in corporate attitudes is setting a new tone for the Japanese corporate landscape.