TOKYO -- Listed Japanese companies bought back 4.35 trillion yen ($41.8 billion) of their own shares from January to September -- the most ever for the period -- driven by a push to improve capital efficiency and corporate governance.
By May, Toyota Motor, SoftBank Group and NTT Docomo had each announced repurchases of as much as 500 billion yen. Many other companies, including Nissan Motor and Nippon Steel & Sumitomo Metal, also unveiled buyback programs of 100 billion yen or more. Total buybacks over the first nine months of the year were up about 40% from the same period a year earlier. The full-year tally could surpass the record of about 4.8 trillion yen marked last year.
Meanwhile, equity financing has lost momentum. Slower economic growth at home and abroad has resulted in lackluster demand for funds to support new business ventures. Offerings of new shares and convertible bonds totaled 720 billion yen over the nine months, the lowest in four years. For example, Aeon Financial Service issued just 13.8 billion yen in new shares.
Bonds are increasingly tapped as a fundraising alternative in light of ultralow interest rates linked to the Bank of Japan's monetary easing. Some 8.5 trillion yen in corporate bonds were floated in the January-September period, up roughly 60% on the year. Toyota Finance issued three-year bonds for a record-low annual coupon rate of 0.0003%.
Listed companies in Japan are sitting on a record cash pile of more than 100 trillion yen. Their return on equity -- a gauge of how efficiently a company makes profits from money provided by shareholders -- slid for a second straight year in fiscal 2015 to 7.8%. This pales against U.S. companies' 12% ROE.
Overseas investors are pushing corporate Japan to trim surplus funds. "Companies with low funding needs tend to buy back shares," says Kengo Nishiyama, senior strategist at Nomura Securities.
U.S. companies, generally further along in corporate governance, are carrying out even bigger buybacks, and the Dow Jones Industrial Average is hovering at record-high levels. Stock repurchases are also buoying Japanese share prices as the strong yen drags on corporate Japan's earnings growth.