Toyota Plans Strategic Share Sales to MUFG and SMFG, Expanding Decoupling of Cross-Holdings

Toyota Motor Corp. is set to buy back its shares from MUFG, SMFG, Tokio Marine, and MS&AD Insurance, as part of a ¥1 trillion share repurchase plan and a strategy to loosen cross-shareholdings. This move, endorsed by the Japanese government, aims to improve corporate governance and shareholder accountability. The divestment, estimated to exceed ¥3 trillion, will be phased over several years, with financial institutions reducing their stakes or fully divesting from Toyota. The decision follows a strong performance by Toyota's shares, which gained 26% this year and 43% in 2023.

The Japanese automotive giant, Toyota Motor Corporation, has announced its intentions to purchase shares worth ¥1 trillion from major Japanese financial institutions, including MUFG, SMFG, Tokio Marine, and MS&AD Insurance [1]. This move is part of a broader strategy to reduce cross-shareholdings, a common practice in Japan that has been under scrutiny for its impact on corporate governance.

This development follows the Japanese government's endorsement of improving corporate governance and shareholder accountability [2]. The government's push has gained momentum, with banks and financial institutions, such as MUFG and SMFG, planning to divest ¥1.32 trillion and ¥1.1 billion of shares in Toyota and Honda, respectively [1][2].

The decision to unwind these cross-shareholdings is attributed to the strong performance of Toyota's shares, which gained 26% this year and 43% in 2023 [1]. The divestment, estimated to exceed ¥3 trillion, is expected to be phased over several years, with financial institutions reducing their stakes or fully divesting from Toyota [1][2].

The implications of this move extend beyond Toyota, as the unwinding of cross-shareholdings is a significant trend in the Japanese market. The practice has been a cornerstone of the Japanese business landscape for decades but has been criticized for its potential negative effects on corporate governance and shareholder value [3].

As the Japanese government and major corporations continue to address these concerns, the Japanese market is likely to experience further changes in corporate governance and shareholder dynamics.

References:
[1] Bloomberg. (2024, June 27). Toyota to Offload Shares in Aisin in ¥1 Billion Deal. Retrieved from https://www.bloomberg.com/news/articles/2024-06-27/toyota-to-offload-shares-in-aisin-in-1-billion-deal
[2] Reuters. (2024, July 2). Major Japanese Insurers Offload ¥31 Billion Honda Shares. Retrieved from https://www.reuters.com/business/autos-transportation/major-japanese-insurers-offload-31-bln-honda-shares-sources-say-2024-07-02/
[3] Investopedia. (n.d.). Cross-shareholding. Retrieved from https://www.investopedia.com/terms/c/crossshareholding.asp