The problem with labelling anything in Japan a bubble is that the word has a lot to live up to.
The late 1980s stock run-up in Japan was so extreme, and its aftermath so traumatic, that it gave its name to an era that still evokes nostalgia and horror.
As madness took hold, the Nikkei 225 Index peaked on the last trading day of 1989 and, 28 years later, remains more than 40 per cent shy of that record.
All that said, large segments of the Japanese equity market are poised to end 2017 exhibiting behaviour that could be described as bubbly.
After holding out for 52 years as a private company, the parent of Japan’s second-largest parcel delivery company, Sagawa, took the plunge and listed on the Tokyo Stock Exchange. It was the biggest IPO of 2017, the shares began a 33 per cent surge from the outset and, by Thursday’s close, the company was worth nearly ¥700bn.
In all the excitement SG Holdings’ president, Tadashi Machida, rather gave the game away: “We don’t have any major funding needs,” he told the media and his newly minted register of investors, “we want to attract talent by becoming a public company.”
To wide swaths of corporate Japan those comments ring absolutely true. For everyone else, they are critical to assessing the prospects for long-term corporate governance improvements, the likelihood of increased focus on shareholder interests and the motives that underlie the managements of listed Japanese companies. Particularly so now, as the TSE nears the end of one of its strongest years (in terms of numbers of companies coming to market) in two decades. With just 11 trading days left in 2017, some 13 companies — most of them young and technology related — are due to IPO on Japan’s four main boards, bringing the total for the year to 91.
That total would complete a five-year run of dramatic increases in IPO activity, all undertaken during an era in which the government has been trying to make managements take the responsibilities of being listed far more seriously. By giving licence to public criticism of managements, the corporate governance and stewardship codes have already revealed that many Japanese companies do not at all enjoy being listed: in theory, the codes should have dulled the IPO market, but the opposite has happened.
Mr Machida was unusually frank but not revealing anything new. One of the prime motivations that has pushed more than 3,500 Japanese companies to list over the past seven decades has been an almost bulletproof reality that young Japanese (or, more accurately, their parents) feel much happier joining a listed company than a private one. Listed status implies stability and, as so often becomes visible during corporate scandals, an unwritten understanding that the company’s main lenders will not feel frightened in the face of crisis.
The normally sedate Topix, which includes behemoths such as Toyota and SoftBank, is up 19.5 per cent this year, while the TSE2, which tracks the more domestic focused, smaller-cap second section of the Tokyo Stock Exchange, has rocketed 37.4 per cent.
But for real exuberance, the place to look is the Jasdaq market, whose main benchmark has soared 41.9 per cent this year, propelled on a wave of new listings and confidence that wage growth is finally lifting the consumer economy.
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