As one of the solutions to revive its economy that have suffered from stagnation of over two decades from 1991 onwards, the Japanese government has sought to change its stakeholder-oriented corporate governance system into more shareholder-oriented one and has implemented several reforms, including the adoption of the 2014 Japanese Stewardship Code and the 2015 Japanese Corporate Governance Code. As a consequence, shareholder engagement and voting have attracted considerable attention in the corporate governance scene in Japan in recent years. In particular, hedge fund activism and proxy fights are becoming more popular as the activists and the challenging shareholders expect that they would receive more support from domestic institutional investors than they had in the past.After describing the transition of the Japanese corporate governance system and the legal measures granted to shareholders, this chapter analyses the current state of the shareholder meeting and shareholder voting and engagement in Japan.

Japan adopted its stewardship code in 2014, and revised it in 2017 and 2020. As it paid much attention each time to the UK Code, one might initially think that Japan was following in the UKʼs footsteps. However, although the Japanese Stewardship Code and the UK Stewardship Code bear superficial resemblance, their fundamental policy objectives are almost diametrically opposed. The UK Code aims to restrain excessive risk-taking and short-termism by making institutional investors more responsible to the public. Conversely, the Japanese Code intends to champion shareholders’ interests by making domestic institutional investors more active shareholders who exert pressure on entrenched management. This divergence can also be seen in the two countriesʼ stance on ESG factors in their respective latest revisions. While the 2020 UK Code revision emphasizes the importance of environmental and social issues, the 2020 Japanese Code revision requires that consideration of ESG factors must be consistent with institutional investors’ investment strategy. Such difference in the goals of these Codes shows that caution is needed when comparing the stewardship codes of different jurisdictions.

The government of Shinzo Abe represents an important turning point in Japanese politics and political economy. Abe became the longest-serving prime minister in Japanese history, and his government enacted important reforms under the banner of “Abenomics.” In this introductory chapter, we provide a broad review of the Abe government and its policies and point out several apparent puzzles to motivate the volume. We argue that the Abe government is the clearest manifestation of a new Japanese political system that represents a full transition away from the 1955 system. The new system is characterized by a strong prime minister with centralized authority, careful management of the prime minister’s popularity, and a focus on policies with broad, popular appeal. Abe utilized and strengthened Japan’s new political institutions to implement significant policy changes across a wide range of issue areas, including monetary and fiscal policy, the labor market, corporate governance, agricultural reforms, and national security.

Abenomics, the package of economic policies adopted by Prime Minister Shinzo Abe since 2013, is commonly credited with bringing the Japanese economy out of deflation and two decades of stagnant growth. Abenomics consists of three arrows: the aggressive monetary policy; the flexible fiscal policy; and structural reforms for growth. The "third arrow" of Abenomics consists of wide-ranging deregulation and promotion in various sector to raise productivity. Conventional wisdom is that the third arrow of Abenomics started in 2013, along with the first and second arrows. This paper argues that many of ideas and implementations that are credited to the third arrow of 2013 originated in the discussion and decision of the first Abe administration of 2006–2007, followed by the Fukuda administration of 2007–2008. The prime minister’s Council of Economic and Fiscal Policy (CEFP) played the key role in the 2006–2008 reform efforts. It took more than five years for the reform efforts and decisions made in 2006–2008 to bear fruit.

After 2012, Prime Minister Abe prioritized agricultural reform as a signature objective of the structural reform, or “third arrow,” component of Abenomics. But while the Abe reforms have enhanced competitive market signals in the farm sector and accelerated the long-term political decline of conservative LDP politicians, farm bureaucrats, and Japan Agricultural Cooperatives (JA) – the “farm lobby” – in the policy process, the lobby remains a significant obstacle to more sweeping change. To illustrate these points and the ongoing tug-of-war between neoliberal reformers and the farm lobby, this chapter explores some of the successes and failures of the government’s agricultural agenda against the backdrop of a deepening demographic and economic crisis in the countryside.

The March 11, 2011, Great Tohoku Earthquake and Tsunami led to a nuclear meltdown at the Fukushima Daiichi nuclear plant, leading many observers to predict a major transformation of Japanese energy policy. However, since the 2012 election of Prime Minister Shinzo Abe, Japan has restarted its nuclear reactors, weakened subsidies for renewable energy, and submitted emissions reduction goals under the Paris Agreement widely criticized as insufficient and reliant on accounting gimmicks. Under what we call Abenergynomics, Abe used energy policy as a tool to support the economic growth objectives of Abenomics, even when the associated policies were publicly unpopular, opposed by utility companies, or harmful to the environment. We show how Abenergynomics shaped Japanese policy toward nuclear power, electricity deregulation, renewable energy, and global climate change negotiations.

The second administration of Prime Minister Shinzo Abe that took power in 2012 changed course from a neoliberal program of maximizing employer flexibility to cut labor costs to a more social democratic policy of improving employee welfare to boost labor participation and productivity. Abe and his advisors did so not due to any ideological conversion but rather as a pragmatic response to the marketplace shift from labor surplus to labor shortage. They embraced policies to support a higher birthrate; increase the workforce, especially among women and the elderly; make workers feel more secure; and raise wages to increase disposable income. This culminated in the “Work Style Reform” (hatarakikata kaikaku) legislation of 2018, which limited overtime hours and promoted more equal pay for equal work. Progressives certainly hoped for bolder reforms, but the policy shift nonetheless altered some Japanese labor practices.

This chapter asks whether the Abe administration’s “third arrow” of structural reforms was useful in fostering innovation and strengthening the global competitiveness of Japan’s economy. It takes the Silicon Valley model and evaluates how much the third arrow of Abenomics added flexibility to some of the core institutions of Japan’s traditional model by pushing toward or adding institutional elements of the Silicon Valley model. The goal for Japan should not be piecemeal adoption but instead strengthening the institutional underpinnings that enable Japan’s startup ecosystem to flourish and coexist with the large-firm-dominated model. This chapter concludes that Abenomics’ third arrow legitimized the institutions supporting Japan’s startup ecosystem by amplifying trajectories of change already underway – not by forcing change in areas that were headed in a different direction. Since institutions supporting the startup ecosystem are emerging in parallel to the existing institutional configuration, the legitimacy provided by Abenomics’ third arrow reforms do represent positive developments and policy for helping innovation in Japan’s economy.

This chapter examines how industry-level markups evolved over the period of Abenomics. Prior to Abenomics during the global financial crisis, the aggregate markups in the manufacturing sector declined by 3.6 percent from 2006 to 2009 and bounced back by 3.2 percent from 2009 to 2012. The fall and rise of productivities contributed the most to the U-shape recovery of manufacturing markups. Over the Abenomics period (2012–2015), markups increased more in the manufacturing sector than in the service sector, and the rise in output prices was responsible for this trend. We discuss some suggestive implications why the first arrow of Abenomics – aggressive monetary policy – effectively improved manufacturing industries’ markups. In a global economic environment where Japanese firms compete with foreign firms, depreciation of the yen eases global price competition and improves their profitability in terms of the yen.