By Yuma Ikeshita / Yomiuri Shimbun Staff Writer

David Semaya, executive chairman of Sumitomo Mitsui Trust Asset Management Co. (SuMi Trust AM), assured that the Japanese stock market will remain strong for the next five years during an interview with The Yomiuri Shimbun.

The asset management company is a subsidiary of Sumitomo Mitsui Trust Group Inc. Semaya approved the efforts of Japanese companies -- which are his company's target for investment -- for placing greater emphasis on corporate governance, which led to greater recognition of the value of assets that companies have.

The following are excerpts from his interview.

The Yomiuri Shimbun: How do you regard the Japanese market?

David Semaya: The most important factor in Japan losing its competitiveness pre-bubble bursting is the corporate governance. The inability to focus on shareholders. A shift (is necessary) from only focusing on stakeholders -- meaning employees, and the company itself and maybe customers -- to focusing more on better corporate governance and returning capital to shareholders when the company doesn't have a good strategy, or using capital to grow even in a difficult demographic environment.

We then have the cross-shareholding. In Japan, where relationships are viewed as extremely important and very, very long-term, this cross-shareholding system is sort of the foundation for so many relationships in big business. That's one of the many things that had to change. I returned to Japan in 2014. (At the time, then) Prime Minister (Shinzo) Abe was a driver for change. Japan went through two iterations of the corporate governance code. Lots of changes were made and that was a very positive thing.

Things are changing in Japan very quickly. There is what I call a lot of "sleeping assets" in Japan. Because of the changes of corporate governance, those sleeping assets are becoming obvious now. That's where we're seeing value created in many Japanese companies. Some of the Japanese companies don't like it because activists come in and they point it out. But I think for the next four, five or six years we're going to see continued strength of the Japanese equity market. There's plenty of value that can be unlocked from Japanese companies.

Yomiuri: What is the appeal of the Japanese equity market?

Semaya: I say, don't forget about Japanese equities, because dividend yield is very high, very nice, and Japanese companies are doing well. We need more Japanese people to invest in Japanese equities.

We see investors who are extremely strategic in long term and want to hold positions in Japan for a very, very long time. Corporate governance changes mean value is being unlocked. We also see pools of capital that are extremely long-term, and (people) believe that Japan will have positive inflation, positive interest rates, and they want to reset their exposure.

And there are groups who are specifically looking for real estate opportunities rather than equities. A lot of interest continues looking at Japan.

Yomiuri: In Japan, it is difficult for startups to grow. What do you think about it?

Semaya: Taking risk is not natural here in Japan. In fact, taking risk is negative culturally for most people. I think education is so important. My children went to international schools, and I observed, very different from the Japanese school, in math, when you have a test question, you have to write out your reasoning, and then you come to the answer. In Japan, they look at the answer, and (with a) red pen, (make a) circle or x. My children, they write out how they got to it, and rather than a check, it's a plus. In Japan, it's never a plus, it's always a minus if you get it wrong. But in the West, in America, here's the answer and let's say it's three points. My child would write, and the teacher would point out plus two. Not full points, but plus two. Your thinking is right, except for here. So, at a young age, we're preparing the students for critical thinking and to actually take risk. This is a part of the culture of taking risk.

Japan really needs to think about how to encourage young people to think a little differently, to take risk. That failing is a learning experience. Building the venture capital startup ecosystem is extremely important for Japan to be able to move quicker. But how do we get there? We have to start with accepting different opinions, diversity of opinions.

Yomiuri: In the United States, there is a growing backlash against environmental, social and governance $(ESG)$ efforts. What do you think about it?

Semaya: The American political system reelects a leader every four years. There is never a straight road.

State by state, there are certain states that continue to move forward, other states not so much, but I don't think the world is taking a massive step back. So, in the short term, not great, but in a longer term, I'm not as concerned as others personally.

Yomiuri: What is needed to accelerate innovation in the financial industry?

Semaya: Even if we, as an asset manager, step up, if our clients here have no need, or they don't want to try something more innovative, we're never going to sell the product. At a previous investment firm (I worked at), the most innovative investment strategies actually came from the clients' needs. If end users don't feel they have the problem, don't demand changes, then asset managers are not going to change. So we need push and pull. We need push from the asset owners, from the individuals.

Yomiuri: Japan has many areas where structural reforms are lagging. What are the areas that need to be prioritized for change?

Semaya: I think there are some obvious answers. One is a more diverse and liquid workforce. We know that the labor population is declining, people are getting married later and later, and they are having fewer children. So, why not provide the ability for childcare, more time off for parents and better integration of women in the workforce? The numbers have improved, but many women in many situations are still in roles that are not at the same level as men. We need to give women the opportunity to both have a career and to have more than two children because we have to have two or more children for the country to economically be sound and viable.

Labor liquidity also is quite low. People join a company for life, they say that's gone away, it hasn't gone away. For big companies, it's still here. I think we need to dial up more risk. If you want to take more risk and you can get a higher bonus and you perform better, that should be OK, especially in certain industries.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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July 09, 2025 03:26 ET (07:26 GMT)

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