Japan’s corporate cash reserves offer an investment opportunity that depends on how companies use their capital. During the In The Hubbis Hot Seat session at the Hubbis Investment Forum – Singapore 2026, Nicholas Ng, Head of Asia Pacific ex Japan Wealth Business at Daiwa Asset Management, argued that governance reform is creating scope for investors to help businesses improve shareholder returns through sustained engagement with management.
Ng’s case centred on companies with substantial cash, modest debt and valuations that leave room for improvement. For wealth managers considering Japanese equities, he presented a strategy in which company-specific changes can contribute to returns alongside the wider market. The approach relies on building trust and agreeing a path to better capital allocation over the medium to long term.
Key Takeaways
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Cash Needs a Purpose: Ng sees Japan’s large corporate cash reserves as a source of potential value when management deploys them more effectively.
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Reform Creates an Opening: Pressure to improve capital efficiency is encouraging dividend increases, share buybacks, asset disposals and investment in growth.
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Relationships Matter: Collaborative engagement seeks to build management support for change in a market where confrontational activism can meet resistance.
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The Catalyst Is Company Specific: The strategy aims to benefit from internal restructuring while retaining exposure to listed equities.
Turning Cash Into Shareholder Value
Ng opened with a striking estimate: at least USD1 trillion sitting on the balance sheets of Japan’s listed companies. He linked that accumulation to decades of deflation and weak growth, during which management teams became reluctant to commit capital. Cash provided security, but could also weigh on valuations when shareholders saw little prospect of its productive use.
The governance reforms now under way are challenging those habits. Japan’s push for companies to pay closer attention to their cost of capital and stock price has made capital allocation a more pressing boardroom issue. Ng highlighted several possible responses, including higher dividends, buybacks, the sale of underperforming assets and reinvestment in business growth. The opportunity lies in identifying which companies can turn that pressure into meaningful change.
Building Support for Change
A large pool of underused capital has attracted international activist investors. Ng nevertheless questioned whether a public, confrontational campaign is always the best way to secure change in Japan. Corporate relationships remain influential, and a management team that feels threatened may respond with takeover defences, cross-shareholding support or legal resistance.
Daiwa Asset Management’s engagement approach, as he described it, works through private dialogue. The manager develops a relationship with the company, proposes changes and seeks agreement on how they can improve its value. That process gives management time to act and makes trust part of the investment work.
For Ng, the distinction affects implementation as much as tone. A demand for immediate change can produce a defensive response; a credible plan developed with management may create a more durable route to reform.
A Different Source of Equity Returns
Ng described the strategy as offering a “private equity-like approach with public market liquidity”. The comparison reflects the manager’s involvement in improving a business while investing through listed shares. Returns are intended to benefit from internal corporate restructuring, reducing reliance on global market momentum as the sole catalyst.
He also placed weight on the starting valuation. Companies with low valuations, high cash balances and limited debt can, in his view, provide a margin of safety while the engagement develops. That is a stock-selection argument rather than a guarantee against losses or a promise that management will implement every proposed change.
“Japan’s corporate revolution is happening right now,” Ng told the audience. His proposition was to participate through companies whose balance sheets offer room for improvement and whose management teams can be persuaded to use that room effectively.
