The Capital Cycle Podcast Japan Merger Mania
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Jun 30, 2025 Justin Hill, a Portfolio Manager for Marathon Asset Management specializing in Japan and Asia Pacific, dives into Japan's evolving corporate landscape. He discusses three distinct merger bids and their implications for shareholder capitalism, highlighting the shift from cash hoarding to active capital allocation. Hill explains how major players like Toyota are influencing governance changes and reviews NTT's strategic acquisition to unify its telecom services. The conversation reveals a trend towards enhanced corporate governance and growing optimism for Japanese equities.
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Macro And Micro Forces Driving Change
- Japan's corporate shift combines macro forces like returning inflation and higher rates with micro changes in governance.
- Activists, Tokyo Stock Exchange guidance, and M&A are collectively pushing firms toward shareholder-focused capital allocation.
Huge Cash Hoards Create Reform Momentum
- Japanese corporates and households hoarded cash after decades of deflation, creating a vast pool of latent capital.
- Mobilising that cash via buybacks, spinoffs, and M&A can materially improve corporate capital allocation.
Internal M&A And Balance-Sheet Efficiency
- Japanese companies are improving balance-sheet efficiency through large share buybacks and rationalising listed subsidiaries.
- The Tokyo Stock Exchange is encouraging consolidation or spin-offs to simplify convoluted group structures.