Japan`s corporate governance code was introduced in 2015 and has already brought many changes. The number of non-core business carve-out deals and take private deals has clearly increased since then. I would even argue that the dismantling of Toshiba would not have occurred the way it did without the earlier introduction of this code incl. stricter disclosure rules.

Now we are witnessing the code`s first revision since then. Two days ago, the FSA`s council for stewardship and corporate governance codes presented the final reform guidelines. Adoption is expected for late May or early June. M&A bankers and private equity firms love it and actively prepare for the expected next buyout spree.

Japanese companies will be urged to provide easy-to-understand explanations on the nature of their long-term shareholdings and related costs. They will have to disclose plans to reduce those long-term shareholdings not earmarked for investment if they are not in line with capital costs.

The new guidelines will not be mandatory but follow the already existing logic of “comply or explain”. Still we can expect a rise in deal and buyout opportunities for strategic buyers as private equity firms alike.

I have heard from M&A bankers that the simple announcement of the upcoming new guidelines has already changed thinking at many corporates. They listen much more to pitches of investment bankers than ever before in the past, knowing they will have to act once the new guidelines are established.

I have argued before that one of Abe`s major economic achievements was the introduction of the corporate governance code in 2015. It is good to see that the government is following through and now taking the next steps.

Industry consolidation and revitalization are needed in Japan – and a clear legal framework will promote this in Japan even more than elsewhere.