Japan Inc boosts buybacks amid calls for higher returns -Nomura

TOKYO Wed May 28, 2014 5:28am EDT

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TOKYO May 28 (Reuters) - Japan's listed companies have stepped up share buybacks and are paying close to record-high returns, including dividends, to shareholders, encouraged by improved profits and pressure to boost return on equity (ROE), a Nomura analyst said.

Nomura analyst Kengo Nishiyama said on Wednesday that share buyback programmes announced by Japanese companies exceeded 100 billion yen ($980 million) in each of the six consecutive months through May.

It was the longest streak of buyback announcements exceeding 100 billion yen since a 22-month run through November of 2008, he said.

"We're seeing more companies saying they want to operate with a greater awareness of corporate value and capital efficiency," said Nishiyama. "Broadly speaking, there's a sense that companies need to improve ROE, and boost shareholder returns as well as margins."

Toyota Motor Corp said in late March that it will buy back up to 1.89 percent of its shares worth up to 360 billion yen in what would be the automaker's biggest buyback in more than a decade.

Several other Japanese companies, including Canon Inc , have made similar moves amid calls for Japanese companies to boost return on equity.

The average ROE among Japanese companies is around 5 percent compared to over 10 percent in the United States and other developed markets. Foreign investors have long criticised Japan's corporate culture for neglecting shareholders. In an effort to attract more foreign investors, the government has been promoting a new stock index, JPX-Nikkei Index 400, which takes ROE into account.

Nishiyama forecast total shareholder returns, including both share repurchases and dividends, would total 11.4 trillion yen for the fiscal year that ended in March 2014, up from around 10.3 trillion paid out a year earlier and close to a historic high of 12.3 trillion paid for fiscal 2007.

He also said the final amount could exceed that estimate as more companies have recently announced large-scale buybacks.

Yamada Denki, which operates discount electronics stores, said on Tuesday it would buy back up to 50 billion yen, or 16.8 percent of its shares outstanding.

($1 = 102.07 Japanese yen) (Reporting by Ritsuko Ando; Editing by Matt Driskill)

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