Japan Inc. Plans Record Dividends of $118bn Amid Reform Pressure

Companies court retail investors as cross-shareholding are unwound

Japan’s publicly traded companies are expected to pay a total of 18.3 trillion yen ($118 billion) in dividends for fiscal 2024, topping records for the fourth straight year as calls grow for corporations to use their capital more efficiently.

The combined fiscal 2024 forecast has grown by around 400 billion yen from the beginning of the period, with 353 companies upgrading their plans. Of them, 119, or over 30%, have decided to increase dividends after initially planning to decrease them or keep them flat.

Chipmaking equipment producer Disco on Jan. 23 said it will raise its annual dividend by 62 yen this year to 369 yen amid growing semiconductor demand for generative artificial intelligence.

Software provider Obic announced a 10-yen dividend increase on Friday to 70 yen, after accounting for its stock split. Obic upgraded its plan by 6 yen as the company nears its earnings target for the fiscal year.

Chemical producer UBE looks to raise dividends by 5 yen to 110 yen, even as the company downgraded its earnings forecast for fiscal 2024 to a net loss due to restructuring efforts.

Some businesses are taking creative approaches to appeal to investors. Daiwa Institute of Research reports that 321 companies adjusted their dividend policies in 2024 — around 40% more than in 2023, and the highest number going back to 2009.

In November, Aoyama Trading said it will adopt either a consolidated dividend payout ratio of 70% or a dividend on equity ratio of 3%, whichever ends up higher. The clothing retailer plans a 62-yen increase in dividends this fiscal year to 127 yen, an upgrade of 66 yen from its initial target.

The trend comes partly in response to calls by the Tokyo Stock Exchange to improve capital efficiency.

“More companies began aiming for better shareholder returns after the TSE’s market reforms,” said Daiwa’s Masahiro Nakamura. With return on equity among Japan’s listed companies expected to see little growth in fiscal 2024 at around 9%, boosting shareholder returns is a priority.

Companies also look to court individuals investing through the tax-free Nippon Individual Savings Account (NISA) program as they unwind cross-shareholdings. High-dividend stocks like Japan Tobacco and Nippon Telegraph and Telephone rank high among the most purchased through NISA.

Retail investors now hold around 20% of shares in listed companies, and households are expected to receive about 3 trillion yen before taxes from dividends in fiscal 2024 — up 50% from before COVID-19. The tally amounts to 0.5% of Japan’s gross domestic product in fiscal 2023.

Share buybacks, which also improve shareholder returns, are rising as well. Japanese companies with fiscal years ending in March set a combined buyback quota of around 15 trillion yen in the April-December period, up around 70% from a year earlier. Their total payout ratio for the fiscal year is seen around 60%, the highest since COVID-19 began.

“The returning Trump administration in the U.S. and a protracted slowdown in China have added to uncertainty, and companies are growing reluctant to make capital investments or pursue mergers and acquisitions,” said Shingo Ide at NLI Research Institute. “We’ll likely see them continue to spend cash on shareholder returns.”