Japan has produced a surprising number of companies that have thrived for a century or more — over 45,000, as of 2024. These organizations have adapted to changing socio-economic climates, surviving wars, economic downturns, and natural disasters.
Nomura, which marks its 100th anniversary this year, is one of them.
Of the 1,698 listed companies on Japan’s TOPIX index, 182 of these firms, or about 10%, were established before 1925. The endurance of these companies — from sectors as diverse as chemicals, finance, retail, and machinery — is a testament to their ability not only to withstand crises but also to implement strategic pivots that allow them to flourish amid uncertainty.
Continuous transformation
Many of Japan’s 100-year-old companies recognize the importance of continuous transformation. They have changed their core business in response to the times or grown from small family-run entities to those taking on corporate governance systems that improve their governance structures.
M&A activity has made it easier for 100-year-old companies to regenerate and, in turn, this has resulted in an environment conducive to learning and adapting, as well as greater discipline in management.
The strength of these 100-year-old companies is reflected in their share price, which has outperformed the TOPIX since the second half of the 1980s. They have also tended to outperform during recessions and periods of weak output.
However, it is important to bear in mind that these positive results may be colored by survivorship bias. Also, their performance can be weak during growth-driven market phases, which tend to favor companies at the center of the latest trends, such as AI companies currently.
Corporate governance reforms cannot be ignored
The median nonresident ownership ratio for shares of 100-year-old companies is higher than for the TOPIX, at 19.6% versus 16.1%. This means they are more likely to adopt corporate governance reforms.
Reforms that have taken hold
In the spring of 2023, the Tokyo Stock Exchange (TSE) released a report instructing listed companies to be more conscious of stock price and the cost of capital and, since then, many of these companies (92% of those listed on the Prime Market, as of May 2025) have taken steps to implement the TSE’s recommendations. As a result, Japan has been moving up the corporate governance rankings of the Asian Corporate Governance Association.
For example, in 2014, only 6.4% of companies listed on the TSE’s Prime Market had boards where at least one third of the members were independent outside directors. But this figure has recently climbed to 98.1%. Also, the percentage of CEOs of large companies receiving performance-based compensation has risen to between 60% and 70%.
Reforms that are expected
We believe corporate governance reforms are likely to continue in 2025 and beyond. The Ministry of Economy, Trade and Industry is currently discussing issues ahead of revisions to the Companies Act. The agenda includes expansion of the employee stock compensation system and online-only general shareholders’ meetings.
The TSE submitted its thoughts on parent–subsidiary listings in January and started reviewing the fair value of management buyouts in February. We expect a further reduction in the number of TOPIX constituents from the end of October 2026 to October 2028 (from around 1,700 to around 1,200).
Higher overseas sales ratios
Earnings per share (EPS) at 100-year-old companies has been stable, increasing sixfold since the early 1990s.
These companies have also been making progress in further globalizing their operations, demonstrated by their higher ratios of overseas sales (local production/local sales) compared with the TOPIX average.
Japanese listed companies’ overseas sales are currently about ¥360 trillion, accounting for over 40% of total sales, and they have been on an upward trajectory since 2010. At the same time, Japanese macro exports are around ¥100 trillion a year. In other words, local production and sales overseas are much higher than exports.
North America accounts for a high proportion of overseas sales at listed companies, with this region accounting for around 16% of total sales (roughly double the figure of about 8% in 2010).
The next highest are Asia (with around 14% of sales) and Europe (around 6%). Although there is little data on China as a standalone entity, we estimate that the mainland accounts for 4–5% of total sales, and Asia sales are broadly scattered across regions such as South Korea, Taiwan, ASEAN, and India.
The impact of forex fluctuations on profits
With overseas sales increasing, the impact of forex rate fluctuations on profits has become an important issue. Rather than the impact of such fluctuations on export competitiveness, the main area of focus is the volatility of profits denominated in foreign currencies (mainly in USD) when converted to yen.
We estimate that every ¥1 fall in the value of the yen boosts earnings by 0.2–0.3%, while every ¥1 fall in the value of the yen now boosts the TOPIX by just over 0.3%, which is lower than before, and closer to the relationship with fundamentals.
Yen depreciation over the past few years has certainly boosted profits in Japan, but global economic factors (replacing global and US real GDP) and domestic inflation factors (the GDP deflator is a proxy variable) have also contributed to profit growth. In contrast, factors related to the Japanese economy made only a weak contribution to profit growth and made many negative contributions.
That said, we expect the Japanese economy to pick up from 2025 onwards in the form of real GDP and industrial production. Accordingly, we think that even if the boost from yen depreciation were to run its course, profit growth would nevertheless remain on an upward trajectory thanks to the combination of global economic factors and Japanese inflation.
A challenge for 100-year-old companies
One specific challenge for 100-year-old companies is that their capital efficiency is lower than that of the TOPIX.
Return on equity (ROE) at these companies has tended to lag the TOPIX since the 1990s. This reflects net margins (median of 6.0% for 100-year-old companies, 6.3% for the TOPIX) and total asset turnover (73% / 77%).
We also note that 100-year-old companies have higher leverage. Median shareholders’ equity ratio is 49.3% for 100-year-old companies and 52% for the TOPIX.
Although 100-year-old companies lag in terms of ROE, in recent years, they have started to reduce their number of subsidiaries and the number of companies in which they have cross shareholdings. We are interested to see if this provides any support for margins.
Some centenarians are agile
We think that Japan’s 100-year-old companies are not stuck in the past. Instead, they are transforming in step with the age and market needs. They are agile while also being able to maintain stability.
Investors looking for long-term opportunities should consider the potential of these enduring businesses.
AloJapan.com