Japan’s corporate landscape has entered a new era of value creation. The Nikkei 225 and TOPIX reached record highs in 2024, and Japanese companies delivered an average annual total shareholder return of 13% from 2020 through 2024—nearly matching the S&P 500. Yet despite strong profit growth and robust cash generation, many companies still face valuation headwinds, reflecting lingering investor skepticism about governance, capital efficiency, and growth.
Sluggish multiple expansion signals the need for a new approach to investor communication. Most Japanese companies issue or refresh Medium-Term Management Plans (MTMPs) every three to five years as part of standard business practice. To resonate with today’s investors, these plans must evolve into compelling equity stories: strategic narratives that demonstrate not just what a company aims to achieve but why investors should choose it.
Tracking Performance
The top TSR performers by industry were insurance, semiconductors, trading companies, games and entertainment, and apparel. Rising interest rates boosted insurers' earnings, while semiconductor firms benefited from demand driven by AI and data centers. Notably in semiconductors, profit growth, not valuation expansion, was the key TSR driver in 2024, marking a shift toward more sustainable value creation.
Among large-cap companies (market capitalization exceeding 1 trillion yen), Fujikura ranked first, leveraging its proprietary optical-fiber technology to meet the demand of global data centers. Other strong performers included Advantest, Disco, and major shipping firms. Five of the top ten companies—Fujikura, Sanrio, ASICS, Mitsubishi Heavy Industries, and Capcom—were new entrants to the list.
What Distinguishes the Market Leaders
BCG analyzed the stock price return of 187 companies that announced MTMPs between 2020 and 2024. We found a stark divide: one week after the announcement, a quarter of firms outperformed the TOPIX return by more than 3%, while another quarter underperformed.
The outperformers had traits such as clear business portfolios, bold targets, and transparent capital allocation. Underperformers, in contrast, often had profit targets that fell short of market expectations or lacked specificity in their growth strategies and profit improvement measures.
Three Strategic Shifts for the Future
To stay ahead in an era defined by geopolitical uncertainty, technological disruption, and investor activism, Japanese companies must make three shifts in their planning:
- Incorporate deeper investor insights to ensure that management understands market expectations and concerns.
- Embrace nonlinear growth by rethinking portfolios from a zero base and exploring innovation and M&A to drive future value.
- Make scenario-based planning standard, preparing companies for multiple possible futures.
The result is a new model for Japan’s corporate communication, one in which strategy becomes story. The MTMP should not be a static document of forecasts but a dynamic articulation of how a company creates sustainable value. By framing MTMPs as equity stories, Japanese companies can build investor trust, strengthen valuations, and lead the next phase of global growth.
