Japan Exchange Group CEO Hiromi Yamaji Reappointed Despite Low Approval Rating

On June 24, Bloomberg reported, Hiromi Yamaji has been reappointed as CEO of Japan Exchange Group. 82.11% of the shareholders endorsed him at the annual general meeting, below 94.09% for last year. In 2023, Yamaji was endorsed by 88.88%, marking a downtrend in shareholder confidence. This confirms increasing investor unhappiness with the stock performance of the company and recent internal issues.

Stock Performance Lags Behind Broader Market Index

Japan Exchange Group stocks have fallen 18.6% over the past year, underperforming the broader Topix index. The Topix index appreciated 1.6% during the period, representing a sharp performance gap. Shareholders were likely affected by such underperformance, as they closely watch leadership positions and competitiveness in the marketplace. Falling stock value often signals declining trust in management’s strategy and ability to deliver returns.

A former Tokyo Stock Exchange employee and his father were charged with insider trading in December. This incident involved confidential information and raised questions about Japan Exchange Group’s internal control systems. In response, Yamaji’s salary was cut to half for two months starting in January. The case drew public attention and triggered concerns about ethical standards within the organization.

Institutional Shareholder Services Influences Voting Behavior

Institutional Shareholder Services urged investors to vote against Yamaji’s reappointment due to governance concerns. Tomoichiro Kubota from Matsui Securities said many foreign investors followed this recommendation closely. The approval rate for Yamaji is probably the result of foreign institutional investors following ISS’s recommendation, he said. However, Kubota noted the misconduct appeared isolated and not indicative of widespread internal problems. Kubota added, “The JPX is not in a critical situation where the approval rating is close to 50%, and I don’t think the company expects to see more votes against him in the future.”  

Proxy Adviser Glass Lewis Supports Yamaji’s Leadership

Glass Lewis & Co. supported Yamaji’s reappointment, citing his reform efforts and international investor engagement. Yamaji, formerly of Nomura, initiated global outreach programs and promoted corporate governance changes. These actions were seen as supporting Japan’s equity market and encouraging investor participation. His reforms also led to more shareholder proposals and the rising influence of activist investors in Japan.

Current Instability Amid Governance Challenges

Despite setbacks, the leadership at Japan Exchange Group does not appear to face immediate instability. However, governance issues and reduced shareholder trust could influence future investor decisions. If concerns persist, it may reduce trading volume and weaken confidence in Japan’s stock market. Such effects could also discourage foreign investment in the broader Japanese financial ecosystem.

Potential Shift of Investors from Stocks to the Crypto Market

Some investors might consider moving capital into the crypto market amid declining faith in traditional markets. If governance problems and weak performance continue, crypto assets could attract institutional attention. Uncertainty within major exchanges has a tendency to push investors into alternative markets in search of growth and diversification. Risk appetite and expectation shifts could be signaled by confidence changes from the stock market into the crypto space.