Japanese companies are increasing dividends and share repurchases at a record rate, providing support to the market and helping the TSE Stock Price Index (Topix), which is on the verge of adjustment, to rebound.

Of the Japanese stock companies that have announced financial reports as of May 10, 53% announced plans to increase their dividends this fiscal year. Goldman Sachs Group data also showed that the Japanese stock company's repurchase announcement this year hit a record high.

This phenomenon stems from pressure from the Tokyo Stock Exchange, which forces companies to improve capital efficiency and valuations. After the TSE index fell nearly 10% from its March high, these measures also helped spur the index's rebound.

Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management, said that the measures taken by the company were welcomed by investors.

Although shareholders' returns partially offset the disappointment brought about by the company's cautious profit guidance, according to SMBC Nikko Securities data, TSE Index expects a net revenue increase of only 0.8% for the current fiscal year.

Japanese companies traditionally give careful guidance at the beginning of the fiscal year, so many investors expect to raise profit expectations during the year. Investors are more likely to develop long-term capital plans while increasing dividends, such as increasing the overall dividend ratio.

Kei Okamura, senior vice president of Lubomai East Asia, pointed out that this provides a clearer long-term perspective and is positive for stock prices. He also mentioned that although stock buybacks are difficult to include in valuation models, changing dividend policies can be clearly incorporated to provide better visibility.

Japan's earnings season enters its final sprint this week, and most companies will release earnings on Wednesday. Investors will keep a close eye on these earnings reports to assess future market trends.

Editor/Jeffrey