Stock Price Average Above 50,000: Management Reforms Needed To Spread Benefits

Editorial

14:29 JST, November 8, 2025

A key stock price average has exceeded 50,000 points, but this stands in stark contrast to the economic reality felt by the public, which is struggling with high prices. Companies must carry out management reforms to ensure benefits are widely distributed.

The Nikkei Stock Average surpassed the 50,000 mark for the first time late last month. The only other time the average exceeded the bubble-era peak of 38,957, recorded on Dec. 29, 1989, was in February 2024. It took just over a year and eight months to reach this major milestone.

Global excess liquidity, fueled by massive fiscal stimulus after the COVID-19 pandemic and monetary easing, continues to drive asset price increases. Expectations that the spread of generative artificial intelligence will accelerate economic growth are also likely pushing up Japanese stock prices.

Prime Minister Sanae Takaichi’s economic policies are another factor. Her policy of focusing investment on sectors critical to economic security has led to notable stock price increases in the defense, shipbuilding and decarbonization-related industries.

Given the evident overheating in the stock market, attention must be paid to the risk of stock prices drastically falling in the future.

Even as the stock market booms, the fact that many in the country do not feel its benefits highlights the challenges that corporate management reforms are facing.

In 2015, the Financial Services Agency and the Tokyo Stock Exchange, under government leadership, formulated corporate governance guidelines outlining a code of conduct for listed companies.

The aim of the 2015 guidelines was to drive economic growth by attracting foreign capital and spurring management reform in Japanese companies, which had been content with lower profit margins compared to Western companies.

As a result, improvements in profit margins and other metrics have been observed. This is likely contributing to the current high stock prices.

The problem is that companies are not effectively utilizing their funds. Retained earnings have nearly doubled over the past decade, exceeding ¥630 trillion in fiscal 2024, but growth in capital investment remains sluggish.

Another issue is that companies often divert funds toward share buybacks to boost stock prices and satisfy shareholders with returns. By July this year, buybacks had exceeded ¥10 trillion and were on track to surpass last year’s record high.

Meanwhile, the rate of labor share — the percentage of labor costs allocated from added value created by companies — fell to about 64% in fiscal 2024. The inadequacy of wage increases is clear.

Companies must not be solely preoccupied with immediate stock boosting measures and returns to shareholders. They are urged to carry out reforms to realize their sustained growth through proactive wage increases and investment in order to foster an economy in which benefits will reach various groups in society.

Last month, the FSA began considering revising its corporate governance guidelines for the first time in five years. The purpose of the revision would be to demand accountability regarding whether companies are effectively utilizing their cash and savings. The guidelines should be highly effective.

(From The Yomiuri Shimbun, Nov. 8, 2025)