The banker turned stock exchange boss rattling Japan’s listed companies

For Hiromi Yamaji, the clubhouse is not what it used to be. The former Nomura banker and head of the Japan Exchange Group (JPX) still plays golf with many of Japan’s most senior corporate leaders. But, he says, these days they are often furious with him.

As many of the executives see it, an old friend has turned both on them and the corporate establishment he was once part of. The 68-year-old’s late career drive to get Japanese companies to achieve higher valuations and call out those failing to address the issue represents a form of disruption that nobody expected — especially from one of their own. 

Yamaji’s stock response to Japan’s corporate elite is characteristically succinct: “We didn’t target you, we target everybody.”

It is rare, anywhere in the world, that the head of an exchange would so openly try to reform the behaviour and complacencies of companies listed on it. That such an assault should be happening in Japan, where the exchange has traditionally been passive and some former chief executives have generally used the role as a low-stress precursor to retirement, is extraordinary.

“To have a regulator exerting this much influence on Japanese corporate management is completely unprecedented,” said Bruce Kirk, chief Japan equity strategist at Goldman Sachs. “This really is a game-changer for corporate governance in Japan”.

Early in his term as head of JPX, which controls the Tokyo Stock Exchange (TSE), Yamaji pointed out that roughly half the companies listed in the top tier of the TSE have undervalued stocks, with price-to-book ratios below 1.0. The P/B ratio measures the market value relative to its book value.

He has made it his mission to significantly reduce the proportion of companies with languishing P/B ratios, to bring the TSE to levels closer to those in the US (5 per cent of S&P 500 companies) and Europe (19 per cent of Stoxx Europe 600). But he will not stop there: once companies have got their P/B ratios above the low…