Japan has revised its Stewardship Code after acknowledging that investors could benefit from a broader set of corporate governance guidelines.

Throughout 2019,
a council of experts reviewed the code, before publishing a revised draft for
review at the end of December. Since then, the expert panel revised the code in
light of submissions received during this consultation period.

Existing signatories of the code will now be expected to update disclosure items, based on the revised principles, by September 2020.

The code, drawn up by the Tokyo Stock Exchange and Japan’s Financial Services Agency, was originally launched in 2014. However, it has been updated to increase engagement and promote sustainable growth in investee companies.

The revised
principles encourage proxy
advisors and pension fund consultants to provide support and advice in enhancing
the functions of the entire investment chain.

“While progress
has been made in corporate governance reform to a certain extent under these codes,
it has also been pointed out that their effectiveness should be further
enhanced,” Japan’s FSA noted in a statement.

The code, which
adopts a principles-based method using the ‘comply or explain’ approach,
comprises eight key principles.

These include
encouraging institutional investors to have a specific policy on how they
fulfil their stewardship responsibilities. It also expects that they publicly
disclose these policies.

Investors are
expected to have a policy managing conflicts of interest in fulfilling their
stewardship responsibilities and should monitor investee companies through a sustainable
growth lens, the FSA said.

Since the code was established, more than 280 institutional investors have signed up.

Investors that
are prepared to sign up to the revised code are asked to confirm this to the
FSA directly, by emailing jstewardship@fsa.go.jp.

Full details of
the conclusions and changes to the code, following the public consultation, are
now available in to read
here, in English.