Japan plans to cut quarterly business reporting rules

A rule requiring Japanese companies to report their performance to the government every three months is likely to be scrapped, the Yomiuri Shimbun has heard.

Companies that raise funds from investors through the issuance of shares or bonds are required to submit quarterly reports to the Ministry of Finance.

However, the business community has called for a review of the practice, citing the heavy administrative burden as it overlaps with the quarterly financial briefings listed companies must submit to exchanges such as the Tokyo Stock Exchange.

It has also been claimed that quarterly reports could encourage companies to seek short-term profits.

Since taking office, Prime Minister Fumio Kishida has pledged to review corporate disclosure rules as one of the pillars of his “new form of capitalism” economic policy, based on his view that current rules have led to undesirable profit-oriented corporate behavior.

The Financial Services Agency plans to submit a bill to revise the Financial Instruments and Exchanges Act to the ordinary session of the Diet next year at the earliest, with the aim of abolishing the rule on quarterly business disclosure reports by April 2024.

Under the planned review, listed companies would still submit quarterly financial information to stock exchanges, but the government is considering making the reports voluntary.

The quarterly reports that companies are currently required to submit to the government are in addition to the annual and semi-annual reports.

For companies with a March year-end, the reports include sales and profits to the end of June and December, as well as the statement of assets and liabilities. Abnormalities are punishable.

The government aims to reduce the burden of information disclosure as business operations expand as part of efforts to tackle decarbonisation and address human rights concerns.

In Europe, Britain and France have abolished mandatory disclosure for listed companies, and Germany has also reduced the number of companies subject to such requirements.

THE YOMIURI SHIMBUN INFORMATION NETWORK (JAPAN)/ASIA