Japan Tries to Alter the Market's DNA

The government of Japanese Prime Minister Shinzō Abe has come up with a tool to shame chief executive officers into boosting returns and encourage big pension funds to put more money into the Tokyo stock market. It’s called the JPX-Nikkei Index 400, a stock gauge that showcases companies that make good use of investors’ cash.

Japan was home to one of the world’s best-performing equity markets last year, in large part because foreign investors are enthralled by Abenomics—the prime minister’s efforts to reflate the country’s long-stagnant economy. Yet Japanese companies are still laggards compared with their U.S. and European counterparts when it comes to focusing on shareholder returns, according to Peter Elston, head of Asia-Pacific strategy at Aberdeen Asset Management.