The Tokyo Stock Exchange (TSE) has begun requiring companies listed on its top-tier “Prime” section of the market to disclose key financial information both in Japanese and English. The move, which took effect on April 1, is aimed at creating a level playing-field between domestic and overseas investors.
Some 1,600 or so Prime-listed companies are now required to disclose financial results in both Japanese and English at the same time. The rule also applies to information that may have a material effect on investment decisions, such as revisions to earnings forecasts, mergers and acquisitions and changes to representative directors.
“The Prime market is a global market. We have decided to mandate English disclosure from the perspective of attracting more overseas investors,” Sayuri Nakamura at the TSE’s listing department told Nikkei Asia.
Disclosure in English is part of a broader trend among non-English speaking countries in Asia. The Taiwan Stock Exchange, for instance, mandated that all listed companies disclose key information, which is equivalent to Japan’s timely disclosure information, in English by 2024. In South Korea, large KOSPI-listed companies are now required to release material information in English within three days of Korean-language disclosures.
Foreign investors often feel they are at a disadvantage when key documents are released only in local languages.
According to a survey released by the TSE in August 2023, 72% of overseas investors responded that they were “somewhat dissatisfied” or “dissatisfied” on Japanese companies’ English disclosures. “Dissatisfaction mostly comes from the gap in the amount of information in Japanese and English, and also from the time lag of disclosure,” said Nakamura.
The move is part of broader efforts by the TSE to bring the governance standards at Japan Inc. to international levels.
The TSE has introduced a series of measures to raise awareness among Japan’s listed companies about their low stock market valuations, urging companies whose share prices are less than their book value to work harder to raise the valuations.
The efforts have been paying off, as the TSE now hears more overseas investors expressing high expectations for Japanese stocks. “We are also hearing securities firms saying that the tide is turning,” said Natsumi Yamawaki, manager at the listing department at the TSE.
“The challenge is how to maintain positive attention to Japanese companies,” Yamawaki said. “We encourage companies to engage with investors and create a cycle that will increase corporate value,” she said. Her hope is to increase the number of “investors who are committed to companies with a medium- to long-term perspective.”
Naomi Fink, chief global strategist at Nikko Asset Management, said TSE’s request for English disclosure is “very consistent” with what has been already done. The TSE is “putting a large amount of emphasis on disclosure as a whole, and I see English disclosure as part of that.”
“We already have quite a lot of overseas investment in Japanese stocks, and of all overseas investors, there’s quite a few activist investors and those that are putting a lot of emphasis on corporate governance,” Fink added.
“If there isn’t transparent data, then you’re less likely to invest overall. To increase transparency for all investors, especially overseas investors, I think English exposure is a big advantage.
As of the end of December 2024, 99% of listed companies on the Prime market already embraced English disclosure one way or the other, according to a survey by the TSE. However, only 59.2% of companies disclosed their timely disclosure materials in English, compared with 93.8% for financial results and 76.4% for IR presentation materials.
According to the TSE, some companies outsource their translation work, but insist that they need to check the translation for accuracy. Some companies say it is difficult to disclose materials in both languages simultaneously, because the materials are subject to review until the last minute.
Analysts say the question is whether the most relevant information is provided in both languages.
“It is important for companies to consider the introduction of English disclosure as an opportunity to find out which kind of information investors want,” Atsushi Kamio, senior researcher at the Daiwa Institute of Research told Nikkei Asia. He thinks what matters is the disclosure of qualitative information which helps investors judge whether a company can make profits continuously.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.