An activist nudge is all it takes in Japan Inc

Times are changing. It used to require a shove from foreign activists to get Japanese companies to think hard about shareholder value. Now a gentle prod appears enough - and peer pressure is at work too. That means it is hard to know who deserves credit for any turnaround in fortunes.

The country's top property group, $31 billion Mitsui Fudosan, pledged last week, in its 2030 strategy outlined in a 55-page presentation, to lift returns and halve its strategic shareholdings. The stock shot up 8% on Friday. The plan partly answers demands from U.S. activist Elliott Management.

CEO Takashi Ueda somewhat embraced shareholder religion when he took charge in 2023, marking the company's first leadership change in over a decade. He's pushing further now, aiming for a 10% return on equity or higher by 2030, up from its latest 6.9% performance. That would take it above peers.

Elliott says the plan reflects "constructive dialogue" it had with Mitsui in recent months. But it's only a partial win. The strategic shareholdings are worth about $1.2 billion, according to Morgan Stanley MUFG Securities. The company stopped short of committing to a timeline to dispose of its 5.9% stake worth $3.3 billion in Oriental Land, which operates Tokyo Disneyland. Mitsui reclassified that as a pure investment as of March last year. Its $260 million planned share buyback over one year, meanwhile, is a far cry from the 1 trillion yen - more than $6.5 billion - share repurchase the U.S. investor is seeking.

Including the gains on Friday, Mitsui shares have risen about one third since news emerged in February of Elliott's roughly 2.5% shareholding. Though this underperforms a 50% rise in peer Mitsubishi Estate's stock, shareholders appear willing to take management assurances about improving performance seriously.

For their part, company bosses are more readily making the right noises on the back of a campaign by the Tokyo Stock Exchange and also fearing a backlash from their increasingly demanding domestic shareholders. With pressure piling up from all sides, applause ought to be shared, too.

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Mitsui Fudosan, the top property group in Japan by market value, said on April 11 that it would target a total payout return ratio of 50% or higher up to its fiscal year for 2026, up from 45%. It also proposes to sell 50% of its strategic shareholdings within three years. Elliott said it was "encouraged by the company's decision to meaningfully raise return on equity, asset turnover, and capital return targets; significantly reduce cross shareholdings; and enhance its corporate governance." It said the targets reflect "constructive dialogue" it has had with Mitsui in recent months.