Increased emphasis on rewarding shareholders via buybacks and dividends is also seen as a positive catalyst for Japanese shares. Earlier this year, WisdomTree noted that its Japanese dividend stream reached an all-time high. Not surprisingly, that dividend growth was led in large part by the export-heavy consumer discretionary sector. [WisdomTree: Japanese Dividends Rise]
One of the tenets of Abenomics is increasing investor stewardship in an effort to make stocks more appealing to investors that were previously chastened by years of yen strength. That effort appears to be working, particularly when it comes to the rising number of buybacks.
“Rising ROE through share buybacks is one of the key catalysts for Japanese equities this year. Now we are seeing more evidence confirming this trend. Japanese stock buybacks have reached the highest level in six years. In April to September (H1 FY2014), 249 companies set up repurchase programs for a total value of 1.85 trillion yen ($16.8 billion), the highest amount since 2008 (2.73 trillion yen). Unlike 2008 when Japanese companies rushed to buy back shares in order to stem stock price drops, this time the surging repurchase is motivated by the need to enhance shareholder return, largely thanks to the government’s push to strengthen corporate governance,” according to Koesterich and Richardson.
Chart Courtesy: BlackRock