Toyota(TM.US) is set to announce a share buyback from major Japanese banks and insurers, part of a broader plan to unwind strategic cross-holdings with financial partners.
Toyota's stock is set to be sold by Mitsubishi UFJ Financial Group and SMBC, while MS&AD Insurance Group, Tokyo Marine Holdings and Sompo Holdings are also set to announce sales of Toyota shares, according to sources. The news is due to be announced later on Tuesday.
The Japanese government has been urging companies to unwind cross-holdings established over decades to cement business relationships, but big banks and companies have been slow to act. The size and importance of the Toyota deal could spark a broader wave of loosening of cross-holdings in Japan.
According to media reports in June, Mitsubishi UFJ Financial Group and SMBC are set to start selling Toyota shares worth 132 trillion yen. MS&AD Insurance Group, Tokyo Marine Holdings and Sompo Holdings are the main non-life insurers holding Toyota shares. If they also join the sell-off, the total amount will exceed 300 trillion yen.
The banks and insurers are planning to sell Toyota shares in large amounts over the next few years, and possibly even sell them off entirely.
Before the sell-off news, Toyota had enjoyed a stellar year, with its shares rising 43 per cent in 2023 after a 26 per cent rise this year.
Some Japanese insurers have already signalled plans to cut or cancel cross-holdings. The Japanese authorities believe cross-holdings are one of the reasons these companies manipulate prices with their business customers.
Toyota is also seeking to sell its stakes in business partners. Earlier this year, Toyota announced plans to sell its stake in auto parts supplier Aisin Seikosha. Denso and Toyota Auto Weaving are also planning to sell their Aisin shares.
In November last year, Toyota announced plans to reduce its stake in Denso from 24 per cent to 20 per cent. Before that, Toyota committed to selling part of its stake in KDDI Corp. for 250bn yen. While selling shares is meant to free up money to fund Toyota's shift to electric vehicles, the money can also be used for buybacks.