How Companies and Investors Can Navigate Japan's Revised Corporate Governance Code

Japan's corporate governance reform is entering a new phase. More than a decade after the Corporate Governance Code first took effect in 2015, the 2026 revision¹ seeks to move beyond formalistic implementation toward governance that works in practice to support sustainable growth and increased corporate value over the mid- to long-term.

Rather than simply adding requirements, the revised code streamlines and sharpens its core principles. It reinforces a principles-based, comply-or-explain approach, while focusing attention on growth-oriented governance, capital efficiency, effective board oversight, useful disclosure and constructive dialogue between companies and shareholders.

The implications extend across both sides of the stewardship relationship, between both companies and investors. Listed companies need to apply the code in a way that reflects their circumstances, explain their approach clearly and understand how shareholders may respond. Institutional investors, in turn, need company-specific insight to assess those explanations, exercise voting rights and engage constructively. The code describes itself alongside Japan's Stewardship Code as, “the two wheels of a cart,"² which is a useful reminder that effective governance depends on companies and investors moving together.

For Companies: Putting the Revised Code into Practice

The revised code’s streamlined structure is not intended merely to reduce disclosure burdens. It is designed to refocus implementation on the substance of governance and the outcomes it supports. For boards, corporate secretaries, investor relations teams and other governance professionals, this creates three closely connected priorities.

Priority One: Strengthen Governance Through Better Insight

The code asks boards to set the broad direction of corporate strategy, support appropriate risk-taking and provide independent, objective oversight. Its principles also address board composition and effectiveness, skills and diversity, succession, remuneration, capital allocation, cross-shareholdings and the management of conflicts of interest.

Meeting these expectations starts with understanding how a company's arrangements compare with relevant market practices and how investors are likely to assess them. Glass Lewis’ Corporate Governance Research gives companies access to the same Proxy Paper analysis and vote recommendations used by investors. Through Governance Hub, companies can review research, policy guidelines, engagement resources and report timelines in one place. Glass Lewis research also offers comparative insight into peer board composition, executive pay, disclosure and other governance practices, helping companies assess their relative strengths and areas that may warrant attention.

Priority Two: Make Disclosure More Decision-Useful

Under comply or explain,³ non-compliance with a principle is not automatically a sign of ineffective governance. The code recognizes that an appropriate approach can depend on a company's industry, size, business characteristics, organizational structure and operating environment. But where a company chooses to explain, boilerplate language is not enough. The explanation should be carefully tailored so shareholders can understand the rationale.

This raises the value of viewing disclosure through an investor lens. Proxy Papers and peer analysis can help companies understand which information investors use to make decisions, where explanations may leave questions unanswered and how disclosure compares with peers. Governance Hub also enables companies to review the accuracy of data used in our analysis via the Issuer Data Report and to monitor Proxy Paper publication and feedback deadlines. ESG Profile and Controversy Alerts provide further context on material environmental, social and governance issues that may shape investor scrutiny and dialogue.

Where a company wants to provide additional context on Glass Lewis research and recommendations, the Report Feedback Statement service enables the organization to submit its perspective for distribution alongside the Proxy Paper to Glass Lewis institutional investor clients.

Priority Three: Turn Shareholder Feedback into Governance Action

Constructive dialogue is central to the revised framework. Principle 1.1 calls on boards to establish, approve and disclose policies and organizational structures for shareholder dialogue, including processes for sharing shareholder views internally and conducting reviews where needed. Principle 1.3 expects boards to analyze significant opposition to company proposals and respond appropriately.

Glass Lewis solutions can help companies prepare for this dialogue with a clearer view of investor priorities. We are working on vote intelligence, to compare historical voting patterns of a company’s investor base and likely future outcomes. Governance Hub provides access to engagement letters and stewardship resources, while Proxy Talks offer opportunities for public companies and investors to engage with Glass Lewis’ clients in special and contested situations. Combined, these different capabilities can help companies anticipate concerns, prepare more focused shareholder conversations and bring relevant insights back to management and the board.

For Investors: Turning Governance Principles into Informed Stewardship

For institutional investors, the revised code reinforces two essential stewardship needs: making informed, company-specific judgments and connecting voting with ongoing engagement. The task is not to reward formal compliance or penalize every departure. It is to assess whether a company's governance approach and any explanation it provides: 1) is credible in light of its circumstances and 2) supports sustainable corporate value.

Make Company-Specific Governance Decisions

Glass Lewis Proxy Papers provide detailed analysis of ballot proposals and proxy voting recommendations informed by corporate governance standards and practices across markets. Controversy Alerts can add timely context on significant ESG-related events, while Climate Intelligence provides forward-looking insight into how companies are managing financially material risks and opportunities associated with the climate transition.

Investors can combine this analysis with their own stewardship philosophy and voting guidelines. Glass Lewis Custom Policies support the consistent application of investor-specific policies, while Viewpoint brings research, recommendations, ballot management and vote execution together in one platform. Report Feedback Statements from companies or shareholder proponents can be reviewed alongside the underlying analysis, giving investors additional context without changing the independence of the Proxy Paper.

Connect Voting, Engagement and Reporting

The code's focus on constructive dialogue also highlights why voting and engagement should operate as a connected process. Information gained through engagement may provide important context for an AGM decision; voting outcomes and governance concerns can, in turn, shape future engagement priorities and escalation.

Glass Lewis' Engagement Management Platform (EMP) enables investors to record engagement initiatives, objectives, milestones and associated interactions, helping maintain continuity across companies, teams and reporting cycles. The EMP functions as a central stewardship operating system for investors. Used alongside Viewpoint and together with our Data Services, it empowers more integrated workflows, which can also be extended to clients’ internal environments through APIs for use in investment, risk and reporting systems.

For investors that require additional engagement capacity or specialist support, Glass Lewis Custom Engagement Services and forthcoming norms-based screening and engagement overlay can complement internal stewardship teams. Together, our capabilities can help investors translate the code's principles into informed decisions and a clearer record of how voting and engagement support long-term value creation.

Supporting Both Sides of Effective Governance

Japan's 2026 Corporate Governance Code places substance, informed judgment and constructive dialogue at the center of the next phase of reform. Companies need to understand expectations, strengthen practices, communicate their reasoning and respond to shareholder perspectives. Investors need rigorous research, policies and workflows that allow them to assess each company on its merits and connect voting with engagement.

Glass Lewis supports both sides of this relationship. By helping companies and investors act on a shared evidence base, our solutions empower the code's overarching objective: governance that contributes to sustainable growth and increased corporate value over the mid- to long-term.