Share buybacks by publicly traded companies in Japan hit a record high of over ¥18 trillion last year due to accelerated corporate efforts to improve capital efficiency and apparent pressure from activist shareholders.
The total amount of share buybacks announced in 2024 nearly doubled to ¥18.04 trillion from ¥9.57 trillion in the previous year, according to Ichiyoshi Securities.
The surge followed a request by the Tokyo Stock Exchange in March 2023 that listed companies put more focus on improving capital efficiency.
A buyback reduces the number of outstanding shares, possibly leading to improvements to price-book ratio and other valuation metrics and profit distribution per share.
“The growing clout of activists is also having an impact,” said Shunichi Otsuka, head of Ichiyoshi Securities’ investment information department.
Listed Japanese companies’ payout ratio rose to 67.4% last year from 57.1% in 2023.
Toyota Motor announced a ¥1.2 trillion share buyback plan as a way to buy shares released from the unwinding of corporate cross-shareholdings.
Such purchases came after the Financial Services Agency called on major nonlife insurance companies to reduce their cross-shareholdings, which are considered a hotbed for fraud in corporate insurance.
The country’s benchmark 225-issue Nikkei average rose by about 20% during 2024, partly supported by share buybacks, which are also expected to underpin share prices this year.
Share buybacks “will continue to be used as a means to increase corporate value in 2025,” Otsuka said, predicting their annual amount will exceed ¥20 trillion.
