TL;DR - The 2021 revision was finalised on 11 June 2021 and designed to take effect with the April 2022 Prime/Standard/Growth market restructuring. - It introduced Prime-only obligations: at least one-third independent directors, TCFD-aligned (or equivalent) climate disclosure, skills-matrix disclosure, English-language IR materials, and electronic voting platforms. - The 2021 Code expanded the rulebook from 73 provisions to 83 (5 General + 31 Principles + 47 Supplementary) and pushed sustainability, diversity and human capital into the comply-or-explain net.
The 2022 market restructuring is the backdrop
You cannot read the 2021 revision without the April 2022 market restructuring in mind. The TSE replaced its four legacy segments — 1st Section, 2nd Section, Mothers, JASDAQ — with three new ones: Prime, Standard, and Growth. Prime was positioned as the premium segment for companies engaging globally with institutional capital. Standard would house the bulk of established mid-caps. Growth would replace Mothers and JASDAQ as the start-up segment.
The Code revision was the policy lever that gave the new segments substantive content. Prime would not be just a label — it would be a comply-or-explain regime with materially higher governance expectations than Standard or Growth. The 2021 revision built that differentiation directly into the Code text.
The five thematic shifts
| Theme | 2018 Code | 2021 Code |
|---|---|---|
| Board independence | Companies should appoint at least one-third independent directors where necessary. Hard floor: two. | Prime Market companies must have at least one-third independent directors (majority where necessary). Standard / Growth retain the floor of two. Issuers are also expected to appoint independent directors with management experience at other companies. |
| Board skills matrix | Supplementary Principle 4.11.1 required disclosure of policy on board diversity. No reference to a skills matrix. | Supplementary Principle 4.11.1 rewritten: disclosure required "in an appropriate form according to the business environment and business characteristics, such as what is known as a skills matrix", mapping director skills to the company's management strategy. |
| Sustainability / climate | Sustainability was referenced only briefly under Principle 2.3. No climate-specific disclosure expectation. | Supplementary Principle 3.1.3 newly written: all companies must disclose initiatives on sustainability, human capital and intellectual-property investment. Prime Market companies must enhance climate disclosure based on TCFD recommendations or an equivalent international framework. Supplementary Principle 4.2.2 adds that the board itself should develop the basic sustainability policy. |
| Diversity in management | Principle 2.4 referred to "ensuring diversity, including the active participation of women". No measurable-target requirement. | Principle 2.4 strengthened + new Supplementary Principle 2.4.1: companies must set and disclose voluntary measurable goals for promoting women, non-Japanese, and mid-career hires into core management positions, alongside HR development and internal-environment policies. |
| Digital, group, Prime extras | Limited reference to electronic voting or English disclosure; both treated as best practice rather than expectation. | Prime Market-specific expectations on (i) English-language disclosure of important materials, (ii) electronic voting platforms (Platform for Electronic Voting administered by ICJ), (iii) heightened board oversight of digital and group governance. |
Sidebar — Prime-only obligations, at a glance
The table below lists the Code provisions that bind only Prime-listed issuers — the regulatory bargain that justified the "Prime" label.
# Prime-only obligation Code anchor 1 At least one-third independent directors (majority where necessary) Principle 4.8 2 Skills-matrix disclosure mapped to management strategy Supplementary Principle 4.11.1 3 TCFD-aligned (or equivalent) climate disclosure Supplementary Principle 3.1.3 4 English-language disclosure of important materials Supplementary Principle 3.1.2 5 Electronic voting platform participation Supplementary Principle 1.2.4 6 Independent directors with outside management experience expected Principle 4.8 (commentary) 7 Heightened oversight of group governance Principle 4.8 + Supplementary Principle 4.8.3
What the Code says — the Prime independence pull-quote
"Prime Market listed companies should appoint at least one-third of the directors as independent directors, regardless of the company's organizational form. If a Prime Market listed company believes it needs to appoint a majority of directors as independent directors… it should appoint a sufficient number of independent directors." — Japan's Corporate Governance Code (2021), Principle 4.8
And on TCFD climate disclosure:
"Companies… should collect and analyse necessary data on the impact of climate-related risks and opportunities on their business activities and profits, and enhance the quality and quantity of disclosure based on the TCFD recommendations or an equivalent framework. In particular, Prime Market listed companies should make such disclosures." — Japan's Corporate Governance Code (2021), Supplementary Principle 3.1.3
The TCFD reference is one of the most consequential single sentences in the 2021 Code. It made TCFD-aligned climate disclosure the de facto comply-or-explain standard for Prime Market companies — and laid the groundwork for the mandatory inclusion of sustainability disclosure in the yuho (annual securities report) from FY2023, and ultimately for the SSBJ standards that take effect in phases from FY2027 onward.
The diversity equation
Supplementary Principle 2.4.1 made Japanese boards do something they had not been asked to do before: publish measurable voluntary targets for promoting women, non-Japanese, and mid-career hires into "core management positions". The Code did not specify the targets — it required only that they be measurable and disclosed.
The numerical context made the principle bite. At the time of the revision (March 2021 fiscal-year-end), women held only about 7.4% of executive seats at the roughly 2,220 listed companies with March fiscal years. The gap between that baseline and the government's later "30% by 2030" target — set out in the June 2023 Priority Policy on Women's Empowerment and Gender Equality — is the policy distance that Supplementary Principle 2.4.1 is doing the work of closing.
A bigger rulebook
The 2021 revision added one new Principle (the cluster reorganisation gave Principle 3.1 a new sub-principle treatment) and nine Supplementary Principles. The Code expanded from 73 provisions in 2015 to 83 provisions in 2021 (5 General + 31 Principles + 47 Supplementary). For an IR rep, the practical point is that the comply-or-explain table in Section II of the CG Report grew correspondingly — and the principle numbering in some sections shifted slightly. The most-numbered new line is Supplementary Principle 4.10.1 (nomination/remuneration committee composition), which was given more specific majority-independence expectations.
What happened at the April 2022 Prime Market launch
The first measurement after the segment switch — the TSE's August 2022 follow-up brief based on CG Reports submitted through 14 July 2022 — showed the comply-or-explain mechanic in motion. About 13% of the 1,839 Prime-listed companies (239) did not yet meet all the new continued-listing criteria at launch and entered the "improvement period", with a March 2025 deadline (covered in Theme 3.3). Compliance with the Prime-specific Code provisions improved sharply in the run-up to the launch — but the long-tail companies that needed time to recruit independent directors, build climate-disclosure capacity, or stand up an English IR function were given explicit room to explain.
Sidebar — "Comply or explain" is not "comply or comply later" The 2021 revision was sometimes read by issuers as setting an effective deadline (April 2022). It did not. A Prime-listed company that explains why it has not yet met the one-third independence floor, with a credible roadmap, is fully Code-compliant. The friction with proxy advisers and stewardship-active investors is a separate, real, market-discipline question — but the listing-contract status is determined by the quality of the explanation, not the binary fact of non-compliance.
What this means for IR
- Audit your CG Report against the Prime-only list. If you are Prime-listed, the seven Prime-only obligations are the seven lines your overseas investors and proxy advisers will read first. Make sure each has a substantive, dated, board-owned compliance narrative.
- Treat the skills matrix as a strategic disclosure, not a checklist. Supplementary Principle 4.11.1 expects the skills matrix to map to the company's management strategy. A boilerplate matrix that lists "finance, legal, governance" against every director without a strategic-rationale column is exactly the disclosure that the Follow-up Council's 2023 From Form to Substance Opinion Statement criticises.
- Build the TCFD pipeline now — before SSBJ binds. Climate disclosure responsibilities under the Code, the yuho, and the eventual SSBJ standards are layered. The earliest of those — Supplementary Principle 3.1.3 — is the one that gives you years of reporting practice before mandatory disclosure rules elevate the legal stakes.
- Disclose measurable diversity goals, not aspirations. Supplementary Principle 2.4.1 is explicit about "voluntary measurable goals". An IR pack that quotes a goal of "promoting diversity" is non-compliant in substance. A goal of "20% women in core management by FY2030, from 9% in FY2024" is compliant.
- Treat English IR as a Code-level expectation, not a courtesy. From 2021 onward, English disclosure of important materials by Prime issuers is a comply-or-explain item. The April 2025 English-disclosure switch (covered in Theme 5.1) tightens this further but the comply-or-explain anchor predates it.
Sources & further reading
- FSA — Revisions of Japan's Corporate Governance Code and Guidelines for Investor and Company Engagement (Apr 2021 outline + 11 Jun 2021 finalisation): https://www.fsa.go.jp/en/news/2021/20210406.html
- JPX — Publication of Revised Japan's Corporate Governance Code (11 Jun 2021): https://www.jpx.co.jp/english/news/1020/20210611-01.html
- JPX — Revised CG Code (English PDF, June 2021): https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l0c.pdf
- FSA — 11 June 2021 explanatory note (English PDF): https://www.fsa.go.jp/en/news/2021/20210611/04.pdf
- JPX — How Listed Companies Have Addressed the Corporate Governance Code (post-AGM Jun 2022): https://www.jpx.co.jp/english/news/1020/20220803-01.html
- Cabinet Office — Highlighting Japan Nov 2021 explainer: https://www.gov-online.go.jp/eng/publicity/book/hlj/html/202111/202111_09_en.html
Cross-references
Next in this theme: Post 2.4 — How to Read a Japanese CG Report in 15 Minutes.
Related posts in other themes: - Post 3.1 — From Four Segments to Three (the market restructuring the 2021 Code was designed to support) - Post 3.3 — The March 2025 Cliff (what happened to companies that entered the Prime improvement period) - Post 5.1 — The English disclosure mandate (the 2025 sequel to Supplementary Principle 3.1.2) - Post 5.5 — SSBJ in Action (where the TCFD seed in 3.1.3 becomes a mandatory standard) - Post 5.6 — "30% by 2030" Is a Pipeline Problem (the diversity trajectory Supplementary Principle 2.4.1 started)