Japan regulators offer flexibility for stability

Before the earthquake, from the end of 2010, although the stock market had not yet recovered to pre-Lehman crisis levels, the market had been showing moderate improvement. While average share prices and corporate valuations still relatively low, many corporate leaders believe that this is a suitable time for them to make drastic management changes by delisting companies through management buyouts or tender offer buyouts with PE backing.

An industry source told AVCJ that maintaining a public listing adds more financial burden and operational costs, and requires the involvement of large numbers of individual shareholders, which often become obstacles to proceeding with restructurings or changes in which a company would have to re-strategize plans for growth.

Against this backdrop, the situation will likely act as a catalyst for Japan's PE firms, particularly in the SME space. Already foreign funds have begun purchasing additional shares of local portfolio companies. The Financial Service Agency (FSA) has received a considerable number of reports from international buyers, reporting that their holdings have reached over 5%. Meanwhile, foreign banks have looked to exit the country. Atsushi Saito, President of the Tokyo Stock Exchange publicly expressed his disappointment in seeing the evacuation of foreign lenders.

Further north in the country, physical damage to manufacturing plants that serve domestic majors such as Hitachi, Toshiba, Mitsubishi Electrics, Fujitsu and NEC, has led to predictions by analysts for a possible decline in production capacity.

In a rare measure of flexibility, Japan's Financial Services Agency and the Tokyo Stock Exchange have exempted companies that have been upended by last week's earthquake from meeting earnings announcement deadlines, according to the Nikkei. Both organizations are easing financial reporting and listing rules in an effort to help public companies - whose core operations have been impacted the most - to remain listed. The government has also addressed the redemption or reduction, or even reimbursement of corporate tax to the local companies for the amount of paid tax before fiscal year 2010. FSA has urged to the local lenders to provide financial supports as well as considering further aid to save the country from further ramifications.

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• Topics
• Regulation
• North Asia
• Japan Asia Investment