What changes
The Financial Services Agency and the Tokyo Stock Exchange published the revised code on 21 July 2026, the first revision since 2021, and the exchange's listing rule amendment took effect the same day. The structure is slimmer: 5 general principles, 31 principles and 47 supplementary principles become 4 general principles and 26 principles. The supplementary principles are replaced by interpretive guidance, which companies are expected to read but which is not subject to comply-or-explain.
For boards, the main changes are:
- Growth and capital allocation. The board should keep checking whether cash and other assets are being used effectively for growth investment.
- CEO succession. The board should be actively involved in the succession plan and have an objective, timely and transparent process for removing a CEO who is not performing.
- Executive pay. Pay should give incentives for medium- to long-term value; the guidance asks boards to set the share of performance-linked and share-based pay deliberately.
- Nomination and pay committees. Companies without a majority of independent directors should have independent committees. Prime companies should, as a basis, have a majority of independent directors on each.
- Independent directors. Prime companies still need at least one third; those with a controlling shareholder need a majority.
Who it applies to
TSE-listed companies. A Japan subsidiary of a foreign group is usually outside it, but listed Japanese partners, customers and joint ventures are in.
Action for employers
- Expect more demand for outside directors. Prime companies short of the mark will be recruiting; senior bilingual executives in your entity may be approached. Settle your policy on outside board seats.
- Use the governance reports. Updated reports, due by 31 July 2027, will show competitors' succession and pay approaches.
- Brief listed affiliates early. Committee composition and pay design take a shareholders' meeting cycle to change.
Sources
- Tokyo Stock Exchange, Japan's Corporate Governance Code (July 2026 edition), 21 July 2026.
- Tokyo Stock Exchange, announcement of the listing rule amendment in force 21 July 2026; "Updating corporate governance reports" (updated 21 July 2026).