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Japan: Corporate Governance Code

On June 1 2015, the Tokyo Stock Exchange (TSE) adopted the Japanese Corporate Governance Code

Mashiro Suzuki
On June 1 2015, the Tokyo Stock Exchange (TSE) adopted the Japanese Corporate Governance Code (Code). The Code is applicable to Japanese listed companies, and is consistent with the Japanese government's growth strategy (published in 2014).

According to the council of experts concerning the Corporate Governance Code, the Code aims to facilitate and improve 'growth-oriented governance' by promoting timely and decisive decision-making that is transparent and fair. Companies' need to be held accountable in discharging the responsibilities that they owe their shareholders and stakeholders.

This perspective is based on the view that, without properly functioning corporate governance, management's decision-making processes will not be protected; if not so protected, management is likely to make risk-averse decisions for fear of being held responsible for any unfavourable outcomes. The intent of the Code is to remove these perceived constraints, and to create an environment in which healthy entrepreneurship is nourished and management is able to make full use of its capabilities.

The Code adopts a principle-based approach, which requires each listed company to make its own determination on whether each action that it takes is pertinent to the principles described in the Code. In addition, the Code also adopts a comply or explain approach, under which each listed company can either: (i) comply with the principles in the Code; or (ii) if it determines that it is not appropriate to comply with any principle in the Code, in view of its prevailing circumstances, provide an explanation for such non-compliance. The specific provisions of the Code, which consist of General Principles, Principles and Supplementary Principles, may be found by referring to the provisional translation of the Code that is published by the TSE (

If the listed company does not take action that is subject to the principles in the Code, or fails to explain its non-compliance with any principle in the Code, the company will be subject to sanctions imposed by the TSE.

Mashiro Suzuki

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