March 2023

JAPAN ACTIVIST INSIGHTS

Monex Activist Forum 2023
- Be an Activist!
Event Report
On February 4th, 2023, Monex, Inc. (“Monex”) and Japan
Catalyst, Inc. (“Japan Catalyst”) hosted the fourth edition of
the Monex Activist Forum, a four-hour hybrid event that
attracted over 5,000 individual investors online and 300 inperson attendees in Tokyo. Since its inception in 2019, theForum has established itself as the preeminent and largest
platform for shareholder activism discussions in the Japanese
investment community.
Monex launched the Forum with the core belief that fostering
effective communication between Japanese companies andretail investors, who own a substantial 17% of Japaneseequities, can encourage companies to review theirshareholder returns and governance, empower retail investors
with a deeper understanding of Japanese companies, andultimately improve the valuation of Japanese equities.
Monex’s mission is to educate retail investors about theirshareholder rights and inspire them to become “activists”.
The growth of the event from 1,000 attendees in 2019 to over
5,000 attendees is a testament to the success of this approach.
The Forum brought together individual investors, academicexperts, industry professionals, and leading activist managers
to discuss key issues such as Japan’s stagnant stock prices
and the role of activists in Japan’s capital markets. The event
was a resounding success, highlighting the growing
importance of shareholder activism in driving positive change
in Japanese companies.

4th Edition since 2019
investors
5,000+ retailjoined live online

investors
300+ retailattended in person

found
92% oftherespondents*event informative69%of respondents**
indicated experience ofvoting shares*651 respondents **564 respondents

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JAPAN ACTIVIST INSIGHTS

The growth of the event from 1,000
attendees in 2019 to over 5,000 thisyear demonstrates the growinginterest and awareness among retailinvestors of the importance ofactivism and corporate reform inJapanThe Forum began with Oki Matsumoto, Chairman ofJapan Catalyst, discussing the importance ofengagement strategies in the age of AI. With the rise ofAI technology and real-time information sharing, findingalpha in investments is becoming increasinglychallenging. He emphasized the need for proactive
engagement strategies that can drive corporatetransformation, create new information and generatealpha. As many Japanese companies struggle to changeon their own, activist investors like Japan Catalyst play a
critical role in driving positive transformations andenhancing productivity and corporate value.
Professor Ken Kusunoki of Hitotsubashi University
then delivered the keynote address, emphasizing theimportance for companies to engage in dialogue with“long-term engagement” investors in order to achievesustainable and long-term corporate growth. Seth H.
Fischer of Oasis Management gave a powerful video
presentation on the power of shareholders, using theirrecent campaign with Fujitec as a case study. Fischer,
who made a surprise appearance at the venue at the end,
encouraged retail investors to exercise their rights to
support good corporate governance. The audience also
enjoyed video messages from Masahiro Okafuji,
Chairman of ITOCHU Corporation, and other eminent
economists and fund managers, who provided uniqueinsights and analysis on the Japanese stock markets.

Video presentation by Seth H. Fischer, Oasis ManagementMr. Fischer made a surprise appearance at the closing of the event

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JAPAN ACTIVIST INSIGHTSThe Forum also featured two engaging panel
discussions with Oki Matsumoto, Jesper Koll andTaro Hirano of Japan Catalyst, KazuhikoToyama, an outside director of Panasonic andTEPCO Holdings, Tsuyoshi Maruki of Strategic
Capital, Toby Rodes of Kaname Capital andKatsunori Tanaka of Ariake Capital. The firstpanel focused the stagnant Japanese stock market,
while the second brought together leading activists
in Japan to discuss their approach to engaging withJapanese companies and their views on theJapanese equity markets from an activist standpoint.
During the panel discussions and Q&A sessions
between retail investors and the speakers, thefollowing key moments emerged:

Q. What do you think is causing the stagnation of Japanese stock prices, and how can it bereversed?
Jesper Koll, an economist and global ambassador of Monex Group, pointed out that the lack of ambitionand clear goals among Japanese business leaders is a significant factor contributing to the stagnationof Japanese stock prices. According to Koll, this has often been observed by foreign institutional investors
in their communications with companies, particularly those run by “salarymen” management. Heemphasized that activists can be instrumental in transforming such companies and bringing about positivechange.
Kazuhiko Toyama, a prominent business leader and corporate governance expert in Japan, expressed asimilar view, noting that over the past 30 years, Japanese top management has prioritized stability overgrowth. Because that many of these individuals have spent their entire careers at the same company since
new graduates, they tend to develop a “village mentality”, protecting their own “salarymen community” andfavoring the status quo over disruptive innovation. Toyama asserted that such management attitudes havecontributed to the low growth and stagnant share prices of Japanese companies.
However, there is hope for change. Oki, who now serves as a member of the Tokyo Stock Exchange (TSE)
Follow-up Council for Market Restructuring, revealed that the TSE has a sense of urgency and is taking
vigorous measures to address the current situation where half of the listed companies are trading
below 1x P/B. According to Oki, the TSE has been quite open to radical opinions from the council
members, including his own, and is modifying its original plans to incorporate them into the reform
initiative. For instance, the TSE is introducing a new measure requiring companies with low P/B Ratio todisclose their plans to improve their capital efficiency within a specific timeframe, a step not included in theoriginal plan.
Toyama supported this idea, arguing that external pressures, such as regulatory requirements, would
be much more effective in changing the behavior of Japanese “salarymen” managers than positiveincentives, such as stock-based compensation, because it would give them a good excuse to change theirpriorities from traditional “community first” to corporate growth and innovation.

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JAPAN ACTIVIST INSIGHTS“To improve profitability and stimulate
growth, Japanese society needs to embracea risk-taking culture and reinvigorate thedynamism of business activities at both thefirm and industry levels.”- Kazuhiko Toyama, Chairman of IGPI Group“The productivity of Corporate Japan canbe enhanced through “the exchange ofproduction factors”, and activist investors
can play a vital role in promoting andfacilitating this exchange.”- Oki Matsumoto, Japan Catalyst

Q. How can we explain why the profitability of Japanese firms declines with firms get older,in contrast to the US firms?
Toyama contended that the lower profitability of Japanese firms is again largely due to theprevalence of a “village mentality” among top management. This mentality often leads them to retain
underperforming businesses and resources rather than strategically reorganizing their business portfolios, as
their US and European counterparts engage in more often and more radically. This has been particularly
evident in the digital sector over the past three decades. Moreover, Japan’s low rate of “business entry andexit” compared to other developed countries has further contributed to its relatively lower growth. To
improve profitability and stimulate growth, Toyama argued that Japanese society needs to embrace a risktaking culture and reinvigorate the dynamism of business activities at both the firm and industry levels.
Oki, a board member at Mastercard, shared similar observations to Toyama and highlighted a key differencein the approach of US and Japanese companies to unprofitable businesses. In the US, publicly traded
companies face intense pressure from shareholders to achieve growth, which often results in the divestitureof low-margin businesses. In contrast, Japanese companies are not particularly good at “exiting” businesses
and tend to hold onto unprofitable businesses for longer periods of time. This difference in “exit”
strategies is a major factor in explaining the productivity gap between the two countries. To boost
productivity among Japanese firms, Oki suggested promoting the “exchange” of factors ofproduction such as human or capital resources, among companies. For example, if two companies haveoverlapping businesses, they could potentially increase their overall productivity by exchanging theresources belonging to one of their businesses with each other. This allows both companies to focus on theircore competencies and allocate resources more efficiently, resulting in improved productivity andcompetitiveness in the global market. Historically, the “zaibatsu,” METI, and banks took the lead instrategically reallocating resources among companies in Japan. Oki believes that in the current environment,activist investors can take on this role.
Jesper added that this potential for productivity growth is very attractive to global investors. The factthat there are many companies with growth potential represents a low-hanging fruit opportunity forinvestors. Furthermore, the growing number of success stories of activists successfully transforming
Japanese companies adds to the appeal of investing in Japanese equities.
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JAPAN ACTIVIST INSIGHTS
Q. What will be the role of activist in Japan’s capital markets?
In response to the questions, Oki cited a statement from the TSE’s policies announced in January 2023:“In Japan's economy, the lack of a smooth transition of personnel and capital resources togrowing areas has led to a prolonged slump in productivity. In order to ensure the sustainable
development of the Japanese economy in the future, it is important to promote industrial
metabolism and innovation in business and society. In doing so, individual listed companies
can not only take measures independently, but they can also consider ways to increase
productivity by exchanging factors of production and by implementing M&As with othercompanies. It is important for TSE to create a framework to encourage such efforts andthereby contribute to the improvement of productivity in the Japanese economy as a whole.”
He revealed that he strongly advocated for this idea of “exchanging factors of production” to increase
productivity during the TSE council, which the TSE agrees with and incorporate into the very beginningof its policy statement. He believes that if a company cannot improve its productivity independently,
exchanging factors of production or merging with other companies in the same industry can be a viableoption. Activists can play a pivotal role in supporting such efforts, ultimately leading to higher
productivity of Corporate Japan, revitalization of capital markets, and higher returns forinvestors.
Tsuyoshi Maruki, CEO of Strategic Capital, highlighted the role that activists can play inpromoting good corporate governance within Japanese firms. He mentioned their recent campaign
against Japan Securities Finance as an example of their efforts, explaining that he had raised concerns
about the company’s governance practices and management appointments in the belief that improving
governance would lead to an increase in shareholder value. According to Maruki, the media’s coverage of
their campaign with JSF has substantially increased compared to the previous year’s campaign, indicatinga gradual shift in society’s perception of activists and their role in promoting corporate governance.
Maruki echoed Oki’s statement, saying that he too believes that activists can revitalize the Japaneseeconomy.
Katsunori Tanaka, Founder of Ariake Capital, a fund specializing in the Japanese banking sector,
noted that although the banking sector has long been seen as abandoned, some top management areactively seeking to transform themselves. Tanaka believes that activists can play a significant role indriving their transformation and potentially eliminating value traps under the right conditions.
Toby Rodes, Co-Founder of Kaname Capital, noted that shareholder activism in Japan was oncetaboo but is now a practice and a requirement. As a foreign investor who raises funds in dollars toinvest in companies that most Japanese institutional investors do not look at, Rodes sees Japanese retailinvestors as his biggest allies in many ways and looks forward to working with them to unleash andrealize corporate value.
Taro Hirano, President of Japan Catalyst, highlighted one of the key roles that activist engagement
can play, which is to help Japanese companies raise prices to the appropriate levels to break thedeflationary spiral, as demonstrated by auto parts suppliers who have successfully passed on their costs
through pricing strategies. He believes that activists’ demand for higher capital productivity canencourage companies to adopt effective pricing policies that can lead to significant increases in
profitability and corporate value.

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JAPAN ACTIVIST INSIGHTS
Q. How has the position of activist funds in Japan changed over the last 20 years? And how doyou see Japanese companies have changed?
Maruki, one of the founders of Japan’s first activist fund, noted that the perception of activist funds inJapanese society has changed significantly since he started the fund in 1999. In particular, he pointed outthat the way the media covers activist activities has changed, and that activist managers no longer have toworry about their children being bullied at school. The large audience for this Forum is also a sign of a bigchange. With governance and stewardship codes in place, he believes large companies have changed
considerably, with over 30% of foreign shareholders pressuring them. On the other hand, there are still manysmall and medium-sized companies with a market capitalization of tens of billions of yen, which are his
typical targets, that have never even had a dialogue with shareholders. These companies may not havechanged much in the last 20 years, left behind in the reforms, and therefore offer attractive investment
opportunities for growth. He feels that institutional investors are also starting to change as they begin to voteagainst management, and he anticipates this trend to accelerate further in the coming years.
Oki then provided some background on the use of the term “activist” in the Forum and the fund’s name.
Despite initial resistance from the board of Monex Group, he was determined to use the term “activist”. His
aim is to rebrand the term by removing negative connotations associated with it through the Forum initiative
and to raise awareness among Japanese investors about the importance of shareholders voicing their opinionsand exercising their rights in revitalizing the Japanese economy.

In concluding the event, Oki Matsumoto expressed his gratitude for the overwhelming enthusiasm
displayed by the attendees of the Activist Forum, which he found unmatched to any other investment
seminars hosted by Monex. This, to him, is a clear indication of retail investors’ strong desire for positivechanges in the Japanese capital markets. He pledged to continue engaging with companies, with the supportof retail investors, to increase productivity and unlock value of companies, generate returns for investors andcontribute to the enhancement of Japan’s capital markets.

According to a post-event survey,
54% of respondents found theevent highly informative, while
38% considered it informative

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JAPAN ACTIVIST INSIGHTS
Post-Event Survey Results: Monex Activist Forum 2023
Did you experience any change as a result of participating in today’s forum? (Total: 561)
(multiple answers possible)
050

100

150

200

250

300

350

Deepened understanding of activists

372

Improved perception of activists
Worsened perception of activists

201
8Became interested in activists

168

Increased awareness as a shareholder

181

Decided to exercise voting rights

97

Developed expectations for Japanese stocks

78

Motivated to take action for Japan's corporate reform

100

No particular impact
Other

Overall evaluation of the forum (Total: 561)
Average
5%

218

Do you invest in Japanese stocks? (Total: 561)

Not very informative2%
Not informative at all

No
9%

1%

Informative
38%

400

HighlyInformative
54%

Yes
91%

Have you ever exercised voting rights? (Total: 543)

Do you think Japanese stocks will rise? (Total: 561)

No31%

Not sure
27%
No10%

Yes
69%

Yes
62%

*This survey was conducted for those who attended the Monex Activist Forum 2023 in person or online. There were 561 responses in total.
Source: Monex, Inc.
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JAPAN ACTIVIST INSIGHTS
The footage of the Forum can be viewed on YouTube through the following links (Japaneselanguage only)➢ Opening Remark and Keynote Address by Prof. Ken Kusunoki➢ Video Messages and Panel Discussions 1➢ Video Presentation by Seth H. Fischer of Oasis Management and Panel Discussions 2*You will be redirected to Monex, Inc. YouTube channel by clicking the links

About Japan Catalyst
Japan Catalyst, Inc. was established as a part of Monex Group, Inc. with the goal of transforming theJapanese capital market and corporate sector. As the business environment rapidly evolves, there is agrowing need for changes in corporate management, and companies are seeking to transform. By offering
support through long-term investment and engagement, we aim to act as a catalyst for positive change inJapanese companies.
Company Website (English) https://www.japancatalyst.com/index-en.html

CONTACTAyaka Matsui
Japan Catalyst, Inc.
ir@japancatalyst.com+81-3-5657-9970

Disclaimer
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