Japan cuts its corporate governance code to 30 provisions to push boards toward growth
Japan has cut its Corporate Governance Code from 83 provisions to 30 in a 2026 revision, the Tokyo Stock Exchange's Haruyuki Yamashita wrote. The shorter, principles-based text puts more weight on how boards explain their allocation of management resources for growth.
The Board Room · Leadership desk
What happened
- The 2026 text adds a new preamble reaffirming the purpose and underlying spirit of the original code.
- Japan adopted its first Corporate Governance Code in 2015, starting from the goal of raising earning power under the Abe government's revitalization strategy.
- The code was revised in 2018 with expanded provisions on cross-shareholdings, and again in 2021 alongside the Tokyo Stock Exchange's market restructuring.
- The 2021 round required Prime Market companies to give at least one-third of board seats to independent outside directors and to set up nomination and compensation committees.
Why it matters
- constraint A tally of compliance across 30 broad principles tells investors and partners less than a tally across 83 did, so the written explanations become the evidence they have to weigh.
- decision Directors have to settle how they will show, in terms shareholders can check, that management resources are going to growth, since the exchange's own official names that as the theme.
- exposure Companies with a thin growth case become easier for institutional investors to press, because the code treats shareholder dialogue as an important means to its aims.
The revision removes 53 provisions [14], about 64 percent of the code [15]. Tokyo Stock Exchange rules, including Rule 436-3 of its Securities Listing Regulations, still require listed companies to follow the code [9]. The code has always worked on comply-or-explain: a company either complies with each principle or explains why it does not [10].
This account comes from the exchange itself. Haruyuki Yamashita, head of policy engagement at the TSE's New York office, wrote that the code was streamlined and made more principles-based to encourage more substantive corporate action [1][3]. In my view, that moves the effort to a different part of comply-or-explain. A narrow provision can be met with a yes in a governance report. A broad principle about how resources are used is harder to satisfy with a yes alone, so investors reading the report end up judging the explanation. Yamashita wrote that the theme best capturing this revision is the appropriate allocation of management resources for growth [5].
The code is nearly two-thirds shorter [15], and its stated purpose covers "defensive governance," such as containing risk and preventing misconduct [7]. It also covers "growth-oriented governance," meant to encourage sound entrepreneurship and stronger earning power [7]. Both serve the "sustainable growth of listed companies and the enhancement of corporate value over the mid- to long-term" [7]. Yamashita wrote that the revision seeks to take the original goal of strengthening earning power "to the next stage" [6].
The 2021 round asked for structure that a company could count and report [13]. Resource allocation for growth is a judgement about what the board decides, and outsiders will find it harder to verify. It arrived five years after the 2021 revision, as the code's third revision since 2015 [2][11].
For directors, the decision this quarter is how the next governance report explains where management resources are going, in terms a shareholder can check. The consequence shows up next quarter in dialogue with shareholders. The code treats constructive dialogue with shareholders as an important means to its aims, and Japan adopted a Stewardship Code for institutional investors in 2014 [8]. Yamashita's published account does not list the 30 provisions or give a first reporting date.
What to watch
- Whether the 2021 Prime Market requirements on one-third independent directors, nomination and compensation committees, and English disclosure survive as explicit text among the 30 provisions.
- The first governance reports filed against the revised code, and whether companies explain more and simply comply less.
- Whether institutional investors revise voting guidelines to assess explanations about allocating management resources for growth.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence55
- Adoption
- Insufficient
- Hype gap+15
- Incentives60
- Confidence60
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Haruyuki Yamashita is the Head of Policy Engagement at the Tokyo Stock Exchange New York Office.
- [2]
Five years later, in 2026, the CG Code was revised for a third time (the Revised CG Code).
- [3]
To encourage more substantive corporate action, the Revised CG Code has been streamlined and made more principles-based, reducing the number of provisions from 83 to 30.
- [4]
A new preamble was added to the Revised CG Code to reaffirm the purpose and underlying spirit of the original CG Code.
- [5]
The theme that best captures this revision is the 'appropriate allocation of management resources for growth.'
- [6]
The Revised CG Code seeks to take the original objective of strengthening corporate earning power to the next stage.
- [7]
The purpose of the Revised CG Code is to promote the 'sustainable growth of listed companies and the enhancement of corporate value over the mid- to long-term,' encompassing 'defensive governance' such as avoiding or containing risk and preventing misconduct, and 'growth-oriented governance' that encourages sound entrepreneurship and strengthens earning power.
- [8]
Constructive dialogue with shareholders is positioned as an important means of achieving the code's objectives; Japan adopted a Stewardship Code for institutional investors in 2014.
- [9]
The effectiveness of the CG Code is underpinned by TSE rules (Code of Corporate Conduct and Rule 436-3 of the Securities Listing Regulations) requiring listed companies to follow the Code.
- [10]
Japan's CG Code has always followed a comply-or-explain approach: a company is expected either to comply with each principle or, if it does not, to explain why.
- [11]
Japan adopted the first edition of its Corporate Governance Code in 2015; its starting point was enhancing companies' earning power, and it was positioned as a major initiative under the 2014 revision of the Japan Revitalization Strategy during Shinzo Abe's second administration.
- [12]
The Code was revised in 2018, including through expanded provisions on cross-shareholdings, and again in 2021 in conjunction with the TSE's market restructuring.
- [13]
The 2021 revision introduced enhanced requirements for Prime Market companies, including appointing independent outside directors to at least one-third of the board, establishing nomination and compensation committees, and enhancing disclosure in English.
- [14]
The 2026 revision removed 53 provisions from the code.
- [15]
The removed provisions are about 64 percent of the previous code, nearly two-thirds.
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