1. Abenomics - Third Arrow What you need to know as an investor
CHARLES YANG, CFA
CFA INSTITUTE BOARD OF GOVERNORS

2. What is Abenomics?
“Japan Revitalization Strategy” to eliminate deflationary mindset
First Arrow – Easy Monetary Policy
Second Arrow – “Flexible” Fiscal Policy
Third Arrow – Growth Strategy/Deregulation

3. Impact from First and Second Arrow
Period :Jan 2010 – Aug 2015
Source : Nikkei Inc. , Bloomberg

4. Impact from First and Second Arrow
（%）
Period: Jan 2010 – Aug 2015
Source :Bloomberg

5. Impact from First and Second Arrow
Period: Jan 2008 – Aug 2015
Source :Bloomberg

6. Impact from First and Second Arrow
Period: Jan 2010 – Aug 2015
Source :Bloomberg

7. Impact from First and Second Arrow
Nominal GDP (Fiscal Year)
(JPY in bn)
Source :Cabinet Office

8. Third Arrow – More than Stewardship Code and Corporate Governance Code
GPIF (Government Pension Investment Fund) Reform
“Womenomics”
University Reform
“Cool Japan”/Tourism

9. Japan Stewardship Code
“Principles for Responsible Institutional Investors”
Draft version in December 2013/Final version approved in February 2014
Adopted by 127 institutions (June 2014)
7 Principles, but boils down to ENGAGEMENT!

10. Corporate Governance Code
Key element of government’s growth strategy from June 2014
Based on OECD Principles of Corporate Governance
Code finalized in March 2015
Applies to wider range of companies than similar codes in other countries
Specifies 5 General Principles and 30 Principles
“Comply or Explain”

11. Toshiba – Embarrassment for Abe
Toshiba is a multinational conglomerate known for consumer electronics, semiconductors, nuclear energy, among others
200,000+ employees globally, 2.4 billion USD operating income
revealed overstatement of operating income by 1.2 billion USD over seven years
resignations from CEO, 2 ex-CEOs & six company directors

12. As investors, need to follow progress in..
Profitability
Popularity
Board Composition
Diversity

13. Return on Equity
Date : Nikkei Newspaper 4/7/2015
Source :Nikkei Inc

14. As investors, need to follow progress in..
Profitability
Popularity
Board Composition
Diversity

15. Approval rating for the Abe Cabinet
Source :Nikkei Inc

16. Stable leadership is a must
Years served as prime minister (post world war)

17. Stable leadership is a must
Increase in stock price during administration
Source : Bloomberg

18. As investors, need to follow progress in…
Profitability
Popularity
Board Composition
Diversity
Source : Bloomberg

19. Independent Directors
Number of firms with an independent director (as of July 2015)
Source : Nikkei Inc

20. As investors, need to follow progress in…
Profitability
Popularity
Board Composition
Diversity
Source : Bloomberg

21. Number of companies with female director
10.5%
(for TSE1)
Source: Bloomberg (3/11/2015)

22. Proportion of female directors
1.5%
(for TSE1)
Source: Bloomberg (3/11/2015)

23. To summarize… “Success” of Abenomics depends on Third Arrow
Adoption of Stewardship Code and Corporate Governance Code within 15 months was AMBITIOUS
Don’t expect quick overall progress, but focus on process and “small wins”

24. Thank you!

25. 2015 Forecasting Dinner Keynote Speaker
Charles J. Yang, CFA
Questions

26. Thank you for attending.
Don’t forget to fill in your forecast entries!