Main points

  • April 28, 2026, TSE announced "Updated requirements regarding 'management with an awareness of cost of capital and stock price'". The central phrase in the official document is “appropriate allocation of management resources.”
  • The request for 2023 has not been withdrawn. The basic flow of understanding the cost of capital and return on capital, analyzing it at the board of directors' meeting, disclosing the plan, and updating it based on dialogue with investors will continue.
  • What has changed is the center of gravity of evaluation. Companies are now being asked not just whether they have disclosed information, but also how they have combined growth investments, business portfolios, owned assets, debt, and shareholder returns to improve corporate value.

From request in 2023 to renewal in 2026

The first request in 2023 first required the board to address cost of capital, return on capital, and market valuation as management issues. Subsequently, TSE added a list of disclosed companies, good practices, cases that are out of step with investors' perspective, and a collection of case studies showing the process of resolving issues.

The April 2026 update does not replace this system with another system. Starting from disclosure, the focus is further deepened to see whether the allocation of management resources has actually changed and whether the results are reflected in figures and explanations.

The official name of the TSE is ``Update of requirements regarding “management with an awareness of cost of capital and stock price''”. At the 27th follow-up meeting, this was discussed as the "Fourth Year Initiatives," and based on the previous requests, points to be emphasized at the implementation stage were sorted out.

The focus of renewal: Appropriate allocation of management resources

What the TSE has once again raised is the question of where to allocate management resources in order to consistently generate profitability that exceeds the cost of capital. The target is not just cash. Includes human resources, research and development, equipment, intellectual property, M&A, business portfolio, debt, owned assets, and shareholder returns.

What is important is not to simply choose between growth investment and shareholder returns. Allocate funds to investments that are expected to generate returns that exceed the cost of capital, and review investments that do not. For funds exceeding business needs, consider debt repayment and shareholder returns. All options need to be compared on the same basis for their contribution to value creation.

The TSE's request page states that stock buybacks and dividend increases may be effective in some cases, but it clearly states that “only that or a temporary response is not expected”. Therefore, the mere fact that shareholder returns have been increased does not explain the review of the allocation of management resources.

Five issues to be asked at the implementation stage

1. Progress toward past goals

Shows how the company has progressed against targets such as ROE, ROIC, cross-shareholdings, and cash allocation disclosed from 2023 to 2025. If the target is not achieved, analyze the cause and explain whether to maintain the plan or modify it. Merely replacing goals with new numbers does not provide continuous validation.

2. Criteria for determining growth investments

Regarding investment in research and development, human capital, capital investment, M&A, and intangible assets, it shows not only the amount but also which competitive advantages will be strengthened and which profit indicators will be linked to. By simultaneously indicating areas in which you will not invest and areas in which you will withdraw, you can convey the reality of selection and concentration.

3. Review of business portfolio

For each business, evaluate whether it can achieve profitability that exceeds the cost of capital in the future. If the outlook is uncertain, compare options such as restructuring, additional investment, alliance with another company, sale, or withdrawal. The explanation of "growing all businesses" does not reveal the priorities for capital allocation.

4. Balance sheet optimization

Check cash and deposits, cross-shareholdings, idle assets, real estate, investment securities, and interest-bearing debt from both sides of the balance sheet. Quantitatively examine the required cash level and debt capacity, and explain the reason for holding in relation to corporate value.

5. Updates reflecting dialogue with investors

Investors' opinions are not required to be adopted as is. It is important to indicate which issues were considered by the board, what was changed, what was not changed, and the reasons why. The quality of renewal depends on how dialogue is used in management decisions.

How to construct a disclosure that shows “execution”

Disclosures for 2026 and beyond will be easier to read if they are organized into the following five chapters.

chapter What to disclose
1. Current status and progress Cost of capital, ROE/ROIC, market evaluation, past targets and results, variance analysis
2. Management resource allocation policy Priorities for growth investment, M&A, human capital, R&D, capital investment, debt, and shareholder returns
3. Business portfolio ROIC by business, response to businesses that are below the cost of capital, and decisions on sale, withdrawal, and reinvestment
4. Balance sheet Required cash, cross-shareholdings, non-core assets, debt capacity, target capital structure
5. Dialogue and next review Main points raised by investors, board considerations, changes, and next update timing

The advantage of this structure is that instead of lining up measures, it can show everything from current situation recognition to judgment, implementation, and verification in a single flow. It is also possible to highlight key points in the corporate governance report and link details to medium-term management plans or dedicated pages.

I'm not looking for a finished form from the beginning.

The institutional investor survey released by the TSE in August 2026 also identified "first steps" for companies that have not yet taken the step of disclosing their information. The most common opinions expressed here do not call for elaborate numerical targets or complete action plans from the beginning.

The first thing you need is

  1. Analyze the cost of capital, ROE/ROIC, and market evaluation, and show the current situation awareness as a manager.
  2. Indicate the direction of improvement and top management's willingness to take action.

It is.

This indicates that updated expectations do not uniformly require sophisticated financial models. What is important is for the company to recognize the issue, start discussing it at the board of directors, and clarify when it should consider the next step. After that, you can improve the accuracy through dialogue and implementation.

Visualization of “progress” added in August 2026

In 2026, the Tokyo Stock Exchange conducted a survey asking domestic and foreign institutional investors which companies are making progress in their initiatives, and published the company names and evaluation comments. This has made it possible to see not only the presence or absence of disclosure, but also the companies whose progress investors have actually recognized.

While the list of disclosed companies shows whether initiatives have been started, this new list shows whether investors assess that initiatives are progressing. Although these are not official ratings, in IR practice they can be used to compare the progress of your company and that of other companies in the same industry.

In the same 2026 investor survey, issues such as decision-making on growth investments, fundamental review of business portfolios, optimization of owned assets, effectiveness of boards of directors, and continuity of dialogue and disclosure were cited as issues for which further improvement is expected. It can be seen that the focus of the update has shifted from simply the amount of disclosure to management itself.

Implications for IR

  1. List commitments from 2023 onwards. Summarize the targets and results announced in the past, such as ROE, ROIC, investment amount, cross-shareholdings, and return policy, in one table, and explain the unachieved items without erasing them.
  2. Illustrating capital allocation in one diagram. Show growth investments, M&A, human capital, R&D, capital investments, debt repayments, and shareholder returns in the same period and in the same units, and explain their priorities.
  3. Do not make business-specific decisions ambiguous. Set an improvement deadline and judgment criteria for projects that fall below the cost of capital. Share with the board the extent to which you are considering restructuring, partnering, selling, or exiting.
  4. Put the target image of the balance sheet into words. Rather than writing policies for cash requirements, appropriate debt, cross-shareholdings, and non-core assets separately, integrate them into the desired capital structure.
  5. Disclose the reason for renewal. For indicators or measures that have changed from the previous year, please include whether the reason was due to performance, business environment, or dialogue with investors.

Source/reference materials

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