Strategic Intent under the New CEO
Antonio Filosa, who became CEO in June 2025, stated that this investment is aimed at preparing for potential U.S. tariffs and revitalizing the company’s American operations. According to Reuters, tariffs on imported vehicles to the U.S. are expected to cost Stellantis about $1.7 billion in 2025. Against this backdrop, the company seeks to strengthen localization by increasing its share of U.S.-based production. The initiative is also positioned as a countermeasure to the high share of imports in Stellantis’s U.S. sales in 2024.

Former CEO Carlos Tavares admitted in June 2024 that his own “arrogance” contributed to delays in addressing U.S. market challenges. The new strategy under Filosa reflects an explicit acknowledgment of those issues.

Competitive Context
Stellantis’s U.S. investment also aligns with shifts at GM and Ford, which are revising strategies around hybrids and adjusting EV-related plans. The investment is therefore seen as a step to secure competitiveness across multiple powertrains, including internal combustion and hybrids.

AISIN’s Relationship with Stellantis
AISIN (Ticker: 7259) was recognized as “Supplier of the Year” by Stellantis in 2023. AISIN Europe and Stellantis also announced a strategic partnership in automatic transmission repair. Furthermore, AISIN’s 2025 Integrated Report states that its North American operations have begun supplying HEVs to both Toyota and Stellantis.

With Stellantis expanding U.S. production and emphasizing local sourcing, suppliers with an established presence and track record in North America are well positioned. AISIN, already a global Tier-1 supplier with a strong footprint, is therefore expected to benefit from increased business opportunities.

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Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

The spot work (short-term, on-demand jobs) market in Japan has expanded rapidly against the backdrop of chronic labor shortages and increasingly diverse working styles. According to Timee, the market size reached ¥121.6 billion in 2024, more than tripling within two years. However, intensifying competition and heightened regulatory scrutiny have become key challenges for market participants.

Mercari’s Withdrawal

On October 14, 2025, Mercari (4385) announced that it will exit its “Mercari Hallo” spot work service by December 2025. The move highlights the difficulty of achieving differentiation and profitability—even for a large tech company with a massive user base—when competing against incumbents that have already established strong network effects.

Structural Drivers of Growth

1. Severe Labor Shortages

   • Industries such as logistics, food service, and retail face chronic labor gaps.

   • Persol Research Institute projects that by 2035, Japan will face a daily labor shortfall equivalent to 3.84 million workers (17.75 million hours), nearly 1.9x worse than in 2023.

2. Rising Worker Demand for Flexible Employment

   • Deregulation of side jobs, removal of the “¥1.03 million wall” tax threshold, and declining real wages have boosted demand for part-time and flexible work.

   • Spot work services—requiring no resume, interview, or delay in payment—fit well with these needs.

Regulatory Landscape: Stronger Worker Protection

The Ministry of Health, Labour and Welfare (MHLW) has strengthened oversight:

• Clarification of Employment Contract Timing & Leave Compensation: Matches made in apps may now be deemed contract formation, exposing firms to obligations for leave allowances if jobs are canceled.

• Guidance under the Employment Security Act: The MHLW warned operators against permanently suspending workers for no-shows, forcing revisions to suspension policies.

These measures protect workers but also increase compliance costs and risks for platform operators.

Why Mercari Exited

• Short Lifespan: “Mercari Hallo,” launched in March 2024, will shut down in December 2025—just over 18 months of operation.

• Competitive Disadvantage: Despite leveraging its 22+ million monthly active users and rapidly accumulating 12 million registered workers, Mercari could not surpass Timee (215A) in matching efficiency or corporate client acquisition.

• Network Effects: Timee, founded in 2018, had already established strong corporate ties, particularly in logistics and food service, and built robust know-how in labor management and instant payment systems.

Market Consolidation:

Following Recruit’s cancellation of its planned spot work service and Mercari’s withdrawal, the market structure is increasingly showing a winner-takes-all dynamic. Network effects make scale decisive, and profits are likely to concentrate among the top players—especially Timee (TSE Growth: 215A).

Timee’s Strengths:

• Large corporate base (tens of thousands of client companies) ensuring stable job supply.

• Strong brand association: “Spot work = Timee.”

• Proactive regulatory compliance and rapid adaptation to MHLW guidance.

Conclusion

The spot work market will likely continue expanding as labor structures evolve. Yet, entry barriers have risen sharply. Mercari’s exit signals a shift to a consolidation phase, where established leaders capture most of the value. For investors, Timee (215A) stands out as the prime beneficiary of this concentration.

At the same time, regulatory tightening on labor protection ensures that all platform operators will face ongoing compliance and labor-management risks.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

This rally is also tied to U.S. President Trump’s remarks earlier today, which sparked speculative inflows into rare-earth related stocks, where Asaka Riken is viewed as a key player.

The company is a resource recycling manufacturer, specializing in recovering and refining valuable metals such as gold, silver, and platinum group metals from discarded electronic devices and industrial waste using proprietary high-efficiency technologies in Japan. In resource-scarce Japan, Asaka Riken’s business model is recognized as having national strategic importance, contributing to a circular economy and supply chain stability.

Technological Strengths and Uniqueness of the Urban Mining Business

(1) Core technologies in existing businesses: High-purity extraction via solvent methods
Asaka Riken’s flagship precious metals recycling business primarily sources materials from defective circuit boards and scrap generated during the production of quartz oscillators, semiconductors, and connectors. Its solvent extraction technology enables selective separation of target metal ions from impurities, achieving extremely high purity.

In collaboration with the Japan Atomic Energy Agency, the company successfully refined recovered metals to 99.999% purity (five nines). This allows resale of recovered materials into the domestic market at high added value.

The firm also possesses selective leaching technology, which dissolves only specific metals from complex components by adjusting chemical formulations. This high selectivity enables rapid and reliable recovery of valuable metals from intricate electronic parts.

These proprietary processes are protected by numerous patents, ensuring both efficiency and quality in recycling while raising high barriers to entry for competitors.

(2) New business focus: Establishing environmental superiority in LiB recycling
In recent years, Asaka Riken has been prioritizing recycling of lithium-ion batteries (LiBs), where demand is surging due to the growth of electric vehicles (EVs).

• “LiB to LiB” Strategy: Recover lithium, cobalt, and nickel from spent LiBs and feed them back into new LiBs. This closed-loop “battery-to-battery” model ensures stable raw material supply while reducing environmental burdens from mining.

• Proprietary wet process: Unlike conventional pyrometallurgical (smelting) methods, Asaka Riken employs a non-calcination crushing pretreatment followed by solvent extraction. This reduces CO₂ emissions and waste residues significantly, with lower energy use compared to dry processes.

• Importantly, it enables efficient recovery of lithium itself—traditionally difficult with smelting.

Alignment with National Policy and Economic Security

Asaka Riken’s business is tightly linked to Japan’s economic security strategy and efforts to secure stable supplies of critical minerals.

• Rare earth supply chain role: In June 2025, Japanese stocks including Asaka Riken hit upper limits after reports that the government would propose a U.S.–Japan cooperation package on rare earth mining and recycling, seen as countering China’s dominance in supply.

• Economic Security Promotion Act compatibility: Its LiB recycling aligns directly with securing “critical minerals” and “storage batteries,” designated as strategically important materials.

The company announced in 2023 that it was the first Japanese manufacturer to achieve the EU’s 2031 lithium recovery rate target (80%) under its Battery Regulation.

Strategic Significance of Expanded Capital Investment

To advance its LiB recycling business, Asaka Riken raised planned investment in its Iwaki plant from about ¥2.2 billion to roughly ¥7.0 billion (scheduled to start operations in 2026).

Relative to the company’s current market cap of ~¥8.4 billion (post-surge), this ¥7.0 billion investment is an extremely aggressive, offensive management decision. Financed through a mix of internal funds and debt, it signals strong conviction in the business’s success and likely contributed to today’s sharp rally.

Business Strategy Perspective

This capital spending increase is closely tied to Asaka Riken’s early-2025 announcement of a recycling agreement with Prime Planet Energy & Solutions (PPES, now Toyota Battery Co.), an EV battery joint venture.

The collaboration goes beyond waste processing, embedding Asaka Riken into the supply chain of LiB manufacturers, ensuring stable raw material procurement and building a closed-loop “LiB to LiB” ecosystem.

Armed with advanced resource recovery technology and environmental advantages, Asaka Riken aims to establish itself as a global leader in circular resource businesses. While it currently benefits from favorable precious metal markets, its medium- to long-term corporate value will hinge on the success of its bold LiB recycling strategy.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

Rare earth elements, such as neodymium (Nd)—a critical raw material for neodymium magnets—are indispensable for electric vehicles (EVs), wind turbines, and military technologies, positioning them at the forefront of geopolitical risk. In Japan, neodymium magnet-related stocks and companies involved in recycling for a circular economy are emerging as sectors of immediate interest.

Key Japanese Stocks to Watch

Shin-Etsu Chemical (4063): Countering Geopolitical Risk through Vertical Integration and Technology

Shin-Etsu is the world’s top supplier of rare earth magnets, boasting a vertically integrated business model that spans everything from rare earth separation and purification to the manufacturing of neodymium magnets.

Competitive Advantages:

• The performance of neodymium magnets heavily relies on heavy rare earths like dysprosium (Dy) and terbium (Tb), which are predominantly sourced from China.

• Shin-Etsu has commercialized a “grain boundary diffusion method” that significantly reduces the use of Dy and Tb—by up to 50%.

• This rare-earth-saving technology offers a decisive defense against rising geopolitical risk, increasing in strategic value as China tightens export restrictions.

• The company’s electronics materials division (which includes magnets) maintains high profit margins. Despite fluctuations in raw material prices, its pricing power driven by technical superiority ensures a stable and profitable business.

Daido Steel (5471): The Game-Changer in Heavy Rare Earth-Free Magnets

Daido Electronics, a subsidiary of Daido Steel, was the first in the world to mass-produce hot-deformed neodymium magnets that completely eliminate the need for Dy or Tb.

Innovative Technology:
Co-developed with Honda, this magnet maintains high-temperature performance without using heavy rare earths—a breakthrough with the potential to revolutionize EV and hybrid motor design and neutralize the risk of Chinese supply cuts.

Market Impact:
Wider adoption of Dy-free magnets could radically reshape the heavy rare earth market, currently dominated by China.

Sojitz (2768): Building a Non-China Rare Earth Supply Chain

As a general trading company, Sojitz plays a central role—alongside JOGMEC (Japan Oil, Gas and Metals National Corporation)—in establishing a non-Chinese rare earth supply network.

Securing Supply:
Sojitz holds a stake in Lynas Rare Earths, a major Australian producer, and has secured exclusive sales rights in Japan for heavy rare earths (Dy and Tb) from its Mt. Weld mine.

Strategic Importance:
As U.S.-China tensions escalate, global efforts to reduce dependence on China are accelerating. The supply route secured through Lynas is a vital lifeline for Japan, growing in value as geopolitical risk premiums rise.

Estimating the Rare Earth Price Shock

During the 2010 “Rare Earth Shock”, the price of dysprosium (Dy)—which determines the performance of neodymium magnets—skyrocketed by over 100 times in just a few years.

Trump’s threat of 100% tariffs on Chinese goods recalls this historical surge and highlights the extreme risk of soaring Dy procurement costs if the supply chain is disrupted.

Cost Breakdown of Neodymium Magnets (Estimated):
In high-performance neodymium magnets used for motors, heavy rare earths like Dy and Tb are estimated to account for 20%–40% of total production costs.

If Chinese export restrictions push prices up fivefold, raw material costs for standard high-performance magnets could spike by over 50%, dealing a severe blow to EV and wind turbine manufacturers.

Conclusion

In this context, companies with technologies that reduce or eliminate reliance on heavy rare earths—like Shin-Etsu Chemical and Daido Steel—and those securing alternative supply chains—like Sojitz—are likely to attract significant attention in the medium term.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

The backdrop to this move is the Act on the Review and Regulation of Important Land Use, which took effect in 2022. The law requires prior notification for transactions involving land deemed critical to national security—such as areas around Self-Defense Forces facilities—but it does not prohibit purchases by foreign nationals outright. The government intends to use the law’s five-year review clause to consider stricter measures, drawing on foreign precedents, and potentially expand the scope of regulation to include residential, agricultural, and commercial real estate more broadly.

Policy Insights from Parliamentary Debates

Sanae Takaichi, the newly elected LDP president, is expected to become Japan’s first female prime minister during the extraordinary Diet session convening in mid-October.

Takaichi is well known as a proponent of restrictions on foreign acquisitions of real estate. Having previously served as a cabinet minister, she has repeatedly emphasized since 2011 the need for tighter controls on land purchases by foreign investors—for example, at the Lower House Budget Committee on January 31, 2023. At the same time, she has consistently pointed out that international commitments—particularly the WTO’s General Agreement on Trade in Services (GATS) and its “national treatment” obligation—pose a major legal barrier.

Because Japan did not secure any reservation under GATS regarding land transactions, it is in principle prohibited from enacting legislation that discriminates between Japanese and foreign buyers. As Takaichi stated in the Lower House Cabinet Committee on February 16, 2024:

“Unfortunately, due to past international commitments—particularly GATS—Japan is bound by the national treatment obligation, which prohibits discriminatory legislation in land acquisition as well as reciprocity-based measures.”

This underscores a deeply rooted recognition within the government: direct restrictions on foreign acquisition are legally difficult under international law. Therefore, any new regulations inspired by foreign case studies are likely to proceed along one of three possible tracks:

• Expansion of use-based regulations: Extending the current land-use restrictions under the 2022 Act (which apply regardless of owner nationality) to cover general real estate, not just strategically important land.

• Indirect regulation: Introducing heavier taxes, notification requirements, or screening mechanisms that target foreign individuals or corporations, while still avoiding conflicts with national treatment obligations. (Examples exist in Canada and South Korea, which impose special acquisition taxes.)

• Laying the groundwork for treaty revisions: Deepening policy debate as a stepping stone for potential renegotiation of international commitments such as GATS, or for securing reservations related to land acquisition in future trade agreements.

Market Impact

Tighter regulation may slow speculative foreign investment in Japanese real estate, which has fueled sharp price increases in resort destinations such as Niseko, Hakuba, and Okinawa, as well as in certain prime urban commercial districts. However, given that direct acquisition bans are difficult under current law, the overall impact on market fundamentals—low interest rates, a weak yen, and domestic demand-supply dynamics—is expected to be limited.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

Meta announced that it will personalize both content and ad recommendations based on interactions between users and generative AI. For example, if a user consults AI about travel, related travel ads will subsequently be displayed. At a time when an increasing number of people use generative AI as a decision-making tool, the impact of employing AI for ad optimization is expected to be substantial.

There are few empirical cases that directly measure the effect of using user prompts as advertising signals, making quantitative forecasts difficult. However, from past research we can infer the scale of potential impact. A widely cited paper, Privacy Regulation and Online Advertising (Management Science, 2011), used large-scale empirical data to show that after the EU’s “Privacy and Electronic Communications Directive” was enacted, the effectiveness of online display advertising in terms of “change in purchase intent” fell by an average of 65% compared to countries without such regulation. If regulation produced such a significant negative impact, then conversely, leveraging user prompt data—so deeply tied to behavior—could yield extremely positive effects.

Implications for the media and advertising industry
According to Dentsu, Japan’s total advertising expenditure in 2024 was JPY 7.673 trillion. Of this, internet advertising accounted for JPY 3.6517 trillion, or about 47.6% of the total. In 2014, this ratio was only 17.1%, underscoring the explosive growth of digital. A similar shift is now underway, and in the medium term AI agents may erode market share not only from television but also from conventional internet platforms.

For corporate advertisers and agencies with high AI literacy, however, this transition could be an opportunity. In Japan, Septeni (4293) has been notable for its advanced collaboration with Meta. (A majority of Septeni’s shares are held by Dentsu, 4324.) While this is framed more as content optimization rather than direct prompt utilization, Septeni’s achievements with Meta’s ASC (Advantage+ Shopping Campaigns) earned it the title of Best AI Solution Partner from Meta in 2024. It is therefore reasonable to expect that Septeni will play a significant role within Meta’s broader ad optimization strategy.

Background: Why AI platforms are accelerating monetization
Turning back to the U.S., around the same time as Meta’s announcement, ChatGPT revealed plans to launch a new TikTok-like service, highlighting the acceleration of “downstream monetization” strategies by generative AI platforms. Several drivers explain this push.

First, the surge in computational costs is severe. Developing, training, and running large language models (LLMs) requires enormous computing resources. Investment in this area is also rising; for example, in September 2025 Nvidia announced it would invest up to USD 100 billion (approx. JPY 15 trillion) into OpenAI.

Second, rising legal and ethical risks are increasing compliance costs. The sourcing of massive datasets for model training has already sparked lawsuits over personal data, privacy, data scraping, and intellectual property infringement, with more expected to come. New regulatory frameworks such as the EU AI Act (which classifies AI systems by risk and imposes restrictions) and the NIST AI RMF (a U.S. government framework for AI use) will require further compliance investment.

Against this backdrop of escalating costs, AI platforms are rushing to monetize, and as a result, the dynamics within the advertising industry are expected to accelerate further.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

Policy Focus and Emphasis on “Decarbonization”

At the core of Shinjiro’s agenda is the promotion of a decarbonized society, a cause he has consistently pursued since his time as Environment Minister. His approach, which significantly influences Japan’s energy policy, positions renewable energy as the nation’s “main power source” and prioritizes its maximum deployment. In 2021, he argued that the Ministry of Economy, Trade and Industry’s target for renewables in FY2030 should be “36–38% or higher” and rejected the idea of setting an upper limit. When he took office as minister in September 2019, only four local governments had declared “Zero Carbon City” goals; that number has since grown rapidly, covering more than half of Japan’s population—about 65 million people. In October 2020, he also announced regulatory reforms to promote the installation of renewable power plants within national parks.

Shinjiro has also presented an ambitious economic vision of creating a “sustainable society” and “a nation suited to a 100-year life expectancy,” including a pledge to raise the average salary by ¥1 million within five years. To achieve this, he proposes boosting productivity, promoting investment, fostering technological innovation, and developing human capital. His pledges also include abolishing the temporary gasoline tax rate, revising income tax policy, and implementing measures to counter rising prices.

Key Sectors Poised to Benefit

If Shinjiro becomes party leader and implements his policies, several industrial sectors could see tangible benefits. The renewable energy sector is likely to gain from his plans to make renewables the main power source, relax restrictions in national parks, and promote the spread of solar panels. Business opportunities could expand across a wide range of fields, including solar panel manufacturing and installation, battery storage, and smart grid development. Companies such as Fuji Electric (6504), involved in geothermal power (Koizumi has previously spearheaded efforts to accelerate geothermal development by easing restrictions in national parks), and renewable energy developer Renova (9519) are expected to attract attention.

IT and manufacturing industries may also benefit from his wage-increase target, as demand rises in areas such as digital transformation support, AI and IoT development, industrial robots, and automation. Moreover, higher wages and measures to counter rising prices could boost consumer purchasing power, benefiting retailers, department stores, electronics chains, and restaurants. In agriculture, Koizumi’s experience as Minister of Agriculture positions him to promote “profitable farming,” rice price measures, and safety nets for producers, potentially opening new business opportunities in smart agriculture, agricultural inputs, and distribution and processing industries.

Challenges and Risks in Policy Implementation

However, Shinjiro’s policies come with significant challenges and risks. Expanding renewables may increase surcharges on electricity bills, potentially leading to much higher household electricity costs in the future—raising concerns about “greenflation” and heavier burdens on consumers. Power supply stability is also an issue, as renewable energy’s intermittency could result in more frequent power shortage alerts. In the transition phase, the costs of decommissioning thermal power plants and fossil fuel storage facilities may hinder investors from recouping their investments.

His economic policy goals also face criticism. The pledge to “raise average salaries by ¥1 million in five years” is seen by some as vague and lacking concrete measures, according to some people. Skeptics question whether a politician without an economics background can deliver on such targets, and doubt remains over whether growth-based assumptions are realistic. Rising inflationary pressure could influence the Bank of Japan’s monetary policy and interest rates, making it difficult to balance growth strategies with fiscal discipline.

Strategic Outlook

Shinjiro’s policies could transform Japan’s industrial structure and create significant opportunities in emerging growth areas, especially in green business. The decarbonization trend is likely to continue over the long term, but issues such as increased public burdens from surcharges, power supply stability, and the securing of fiscal resources and discipline are unavoidable. How these challenges are addressed will likely determine the success or failure of the next administration if Shinjiro becomes prime minister.

Disclaimer

Please note that ThinkFront’s role is strictly limited to providing information. We do not engage in any activities that may be construed as solicitation under the Financial Instruments and Exchange Act of Japan, including recommendations to buy or sell securities or the presentation of target prices.

Reports issued by ThinkFront are solely intended for informational purposes. They do not constitute investment advice, opinions, or recommendations, nor are they intended to solicit or promote specific investment actions.

ThinkFront makes no warranties—explicit or implied—regarding the accuracy, reliability, or interpretation of any data presented in its reports. We shall not be held liable for any damages arising from the use of our reports.

Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

Japan’s real estate market, especially in urban tower condominiums, has been drawing social attention due to soaring prices. In Tokyo’s 23 wards, for example, the average price of a new condominium exceeding ¥100 million has made it increasingly difficult for ordinary citizens to purchase homes—this is being recognized as a serious social issue. One of the major factors behind this price surge is pointed out to be property purchases by foreigners for investment purposes, sparking active domestic debate. In particular, the fact that Japan has almost no restrictions on real estate purchases by foreigners compared to other major global cities has fueled the discussion. In response to this situation, on May 28, 2025, the Ministry of Land, Infrastructure, Transport and Tourism announced that it would launch its first full-scale investigation to grasp the reality of investment purchases by foreigners in condominium price inflation. This groundbreaking attempt will analyze actual practices by using registry information and inferring foreign purchasers by their address entries. It becomes clear that Japan’s real estate market is being forced to adopt new policy responses amid the interplay between globalization and domestic housing issues.

Background and International Comparison

Until now, the Japanese government has adopted a policy of actively attracting foreign real estate investment, aiming for sustainable development in a declining-population society and strengthening international competitiveness in the real estate sector. In the “Real Estate Industry Vision 2030” issued by the Ministry of Land in the first year of the Reiwa era (2019), it is explicitly stated that “the real estate industry is expected to actively support creating an environment in which foreigners can live and work easily,” with measures to facilitate foreign real estate transactions and create a favorable investment environment. In Japan’s tax regime, property tax tends to be relatively low (around 1.4 % of assessed value as the standard rate), and the absence of restrictions on foreign purchasers has indeed attracted foreign investment under a “free market” environment. In Tokyo, not only commercial real estate but also residential properties such as condominiums in the central three wards (Shibuya, Minato, Chiyoda) have seen increasing purchases by wealthy foreigners, making them an influential buyer group by 2025. On the other hand, some view that the overheating risk, as seen in other cities, remains limited for now. However, if the trend continues, there is concern that Japan could eventually face similar problems.

In other major global cities, many examples exist of strict regulations on foreign ownership to curb real estate overheating. For example:

In Hong Kong, since 2012, a 15 % additional stamp duty has been imposed on foreigners (i.e., non–permanent residents) to suppress inflows of external capital. The rate was halved in 2022–2023 in response to market stagnation, but the regulation remains.

In Singapore, in April 2023, the Additional Buyer’s Stamp Duty (ABSD) rate for foreign buyers was doubled from 30 % to 60 %, effectively imposing harsh restrictions on speculative overseas purchases.

In London (UK), in 2021 a 2 % stamp duty surcharge was introduced for property purchases by non-residents, reinforcing measures against foreign capital inflow.

These international trends encourage reconsideration of Japan’s current unregulated posture.

Policy Debate and Possible Measures

This issue has also surfaced in domestic politics. On May 9, in the House of Representatives’ Committee on Land, Infrastructure, Transport and Tourism, Liberal Democratic Party member Koichi Tani remarked that “as a national policy, we should not leave this unattended, and should work on regulation or restraint of tower condominium purchases.” Further, in the 2025 LDP leadership election, “real estate purchase regulation” (including foreign buyers) became a hot topic in policy debates as reported by the Yomiuri Shimbun. This reflects growing public concern over how rising real estate prices affect everyday life.

As for concrete countermeasures, new institutional initiatives are already being discussed. For instance, Kobe City is considering introducing a “vacancy tax” on tower condominiums. This tax would target properties purchased for investment but not occupied, in order to deter speculative buying, address concerns about vacant units or future derelict buildings, and encourage effective housing supply. Such a vacancy tax is also expected to have an indirect effect in restraining investment purchases by foreigners.

However, there are voices cautioning against introducing foreign-resident regulations. As noted above, the Ministry of Land’s earlier “Real Estate Industry Vision 2030” viewed inbound and outbound capital flows as important to bringing new demand and vitalizing the real estate market. In a context of declining population, capturing such demand is still seen as essential. Excessive regulation might hinder the influx of foreign capital and dull the vitality of the real estate market.

Currently, the survey being undertaken by the Ministry is the first quantitative effort to ascertain the proportions and trends of foreign buyers—data that have been lacking to date—and it may form the foundation for future policy debate.

Outlook and Challenges

The possibility of introducing foreign-resident regulations on tower condominiums in Japan is now entering a turning point. Rising public dissatisfaction over housing scarcity and real estate price inflation, combined with international precedent, is prompting reflection on the “free market” approach. The outcomes of the LDP leadership race and the Ministry’s investigative results are likely to have major influence on future policymaking.

Nevertheless, the government and industry’s view of foreign investment as a growth driver remains strong, and the immediate adoption of stringent regulations like those in Hong Kong or Singapore appears to require careful deliberation under current conditions. In the near term, more incremental and diverse approaches may take precedence—such as strengthening guidelines for trouble prevention based on actual data, and considering vacancy taxes like that in Kobe. For example, heavier taxes on short-term resale or additional taxation on second homes may be explored to suppress speculative buying without undermining genuine housing demand or long-term investment.

In a Japan increasingly facing population decline, realizing a healthy real estate market and assuring people’s secure access to housing are urgent tasks. The balancing act between global financial capital mobility and domestic social needs will be key. The government, relevant ministries, and the real estate industry’s future responses will be closely watched.

On September 27, Nikkei reported that television receivers may have been exploited in a recent incident where customer brokerage accounts were hijacked. According to investigative sources, TV set-top boxes (STB) were allegedly used as a springboard for unauthorized access to financial accounts. The revelation that such widely perceived “innocuous” consumer electronics can be leveraged for financial cybercrime may trigger a fundamental shift in public awareness toward cybersecurity.

Several vulnerabilities make STBs — and by extension many IoT devices — particularly attractive targets for cyber attackers. These include unchanged default passwords, lack of regular firmware updates, and generally weak or nonexistent security protocols. These weaknesses are common across the IoT landscape, presenting hackers with a large, soft target surface. In fact, brute-force attacks and firmware exploits are frequently used to take control of devices like STBs.

Potential Beneficiaries: IoT Security-Related Stocks

This incident is likely to fuel stronger demand for better security awareness and countermeasures among individuals and businesses. In the mid- to long term, this trend could benefit cybersecurity vendors, consulting firms, and software developers. In Japan, listed companies such as FFRI Security (3692), NTT Data (a subsidiary of NTT (9432)), and NEC (6701) are known to be involved in IoT-related security solutions.

Japan’s Ministry of Internal Affairs and Communications (MIC) is also co-leading a project called NOTICE, which aims to improve the security of IoT devices and prevent cyberattacks before they occur. A list of participating organizations is publicly available here (in Japanese).

The U.S. Is Already a Mature Market

In the United States, legal frameworks and guidelines such as the IoT Cybersecurity Improvement Act have already been established to ensure baseline protection standards for connected devices. In contrast, Japan currently relies on broader regulations such as the Telecommunications Business Act and the Electrical Appliance and Material Safety Act, alongside voluntary guidelines issued by the Ministry of Economy, Trade and Industry (METI).

Leading U.S. players in the IoT security space include Cisco and Palo Alto Networks. According to IMARC, the U.S. market size for IoT security has already reached an estimated $34.8 billion, underlining the sector’s strategic significance.

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Please also be aware that directors and employees of ThinkFront may currently hold, or may in the future engage in transactions involving, securities issued by companies covered in our reports. As such, there may be potential conflicts of interest that could influence the objectivity of our analysis.

Investor relations (IR) materials that investors and analysts find useful tend to share common characteristics. However, the evaluation criteria are diverse, and it is difficult to clearly define the truly important ones. To address this challenge, we conducted a natural language processing (NLP) analysis of earnings presentation materials. The analysis was performed at three levels of granularity: word-level, slide-level, and document-level. For each, we examined the data against evaluation axes relevant to IR disclosure quality.

Our findings suggest that three factors are particularly important in the evaluation of IR materials:

1. Disclosure of key KPIs such as ROIC

2. Detailed and comprehensive segment-level disclosures

3. Clear articulation of management goals and commitment

Based on this analysis, we are offering companies free consultation and scoring services for their IR materials. If interested, please contact us via the link below.

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Data Coverage

The dataset includes 472 companies from the TOPIX 500 index for which we were able to extract text from the most recent full-year earnings presentation documents (Japanese only). Companies without such disclosures or whose PDFs did not allow text extraction were excluded.

Dependent Variable: “High-Quality IR Company”

Our dependent variable is a dummy indicator showing whether a company is regarded as having high-quality IR practices. Specifically, it takes the value of 1 if:

• The company has been recognized in Extel IR awards (when disclosed), or

• It was selected as a “Best Disclosure Company” by the Securities Analysts Association of Japan (one per sector, 2024).

Otherwise, the variable is 0. For simplicity, we refer to these groups as “high-quality IR companies” and “other companies.”

While the evaluation of IR quality is not based solely on earnings presentation materials, this analysis assumes that companies recognized as “high-quality IR firms” will also be evaluated positively from the perspective of their presentation materials. Moreover, by focusing on these materials, we expect to uncover practices that are distinctive to high-quality IR firms.

Of the 472 companies analyzed, 17 were classified as high-quality IR firms. These are: Hitachi, Mitsui & Co., Sumitomo Mitsui Financial Group, Tokio Marine Holdings, SoftBank, Ajinomoto, Chugai Pharmaceutical, Bridgestone, Nippon Steel, TDK, Mitsui Fudosan, Isetan Mitsukoshi Holdings, Mitsui Chemicals, Nomura Research Institute, Idemitsu Kosan, Kawasaki Kisen Kaisha, and Konami Group.

It should be noted that due to data constraints, some companies recognized by the Securities Analysts Association of Japan as “Best Disclosure Companies” were not included in this analysis simply because they were not part of the 472-company universe. In addition, Extel award results are included only when the company itself disclosed this information and it was identifiable through an online search.

Explanatory Variable Group 1: Word-Level TF-IDF Data

For the word-level analysis, the text contained in each company’s presentation materials was segmented into morphemes (the smallest units of meaning, hereafter simply referred to as “words”). This segmentation was performed using the morphological analysis engine MeCab.

We then applied a two-stage filtering process to the extracted words:

1. Frequency filter: Only words that appeared in at least 10% of the 472 companies’ presentation materials were retained. This yielded 1,568 words.

2. Manual filter: Three categories of words were excluded:

   • Words with no analytical significance (e.g., “various,” “main”)

   • Sector-specific terms (e.g., “resin,” “store”)

   • Words tied to particular business exposures that cannot easily be changed by corporate effort (e.g., “Vietnam,” “Americas”)

Since the purpose of this study is to provide insights that issuers can use to improve disclosure through their own efforts, we excluded not only meaningless words but also those tied to factors beyond a company’s control. After this filtering, 387 words remained.

For each issuer’s presentation text, we applied TfidfVectorizer, which vectorizes based on word frequency and rarity. The resulting TF-IDF values serve as proxy variables, indicating the relative importance of each word within a company’s presentation materials.

Explanatory Variable Group 2: Quantitative Data

In addition, we calculated basic quantitative measures for the 472 companies’ presentation materials, such as total character count. This allowed us to test whether companies with more slides or longer text tended to be evaluated more positively. Since preliminary hand checks suggested potential significance, we also included the ratio of English characters within Japanese presentation materials.

Explanatory Variable Group 3: Slide Classification Data

Next, we constructed slide-level analytical data to examine whether the types of slides included in an issuer’s presentation are linked to IR evaluation. For example, we wanted to verify whether including slides on ESG topics contributes to stronger evaluations.

To categorize slides systematically, we vectorized the text from each slide using the model oshizo/sbert-jsnli-luke-japanese-base-lite. This model has 768 dimensions, 133M parameters, and achieves a relatively high score of 0.811 on the “JSTS valid-v1.1” benchmark dataset.

We then applied hierarchical clustering based on cosine similarity, treating the 0–1 distance between sentence vectors as the metric. This enabled us to group slides according to similarity. As with the word-level analysis, however, certain slides were highly idiosyncratic to individual companies. Because such slides are of limited analytical value, we excluded slide groups that appeared in 40 or fewer companies’ presentations (i.e., if a group was represented in the decks of fewer than 41 companies, it was dropped from analysis).

As a result, 38 slide groups remained. We reviewed samples from each group and assigned descriptive labels.

• The largest group was “Positive-tone performance and plans” (6,871 slides).

• The second largest was “Tables showing performance figures” (5,789 slides).

• The third was “Disclaimers, cover pages, and tables of contents.”

We then applied manual filtering to remove:

• Slide groups clearly irrelevant to IR evaluation (e.g., tables of contents, slides with only company logos)

• Slide groups tied too strongly to specific sectors or companies (e.g., pharmaceutical-related slides, groups containing only Asics’ slides)

After this filtering, 20 slide groups remained. For each of the 472 companies, we created dummy variables indicating the presence (1) or absence (0) of each slide group in their presentation materials.

Explanatory Variable Group 4: Qualitative Question Scores

Finally, we constructed a dataset to capture elements not fully addressed by the previous explanatory variables. These were based on three qualitative questions that we considered important:

1. Change over time: Do the presentation materials make it possible to discern changes relative to past disclosures?

2. Management accountability: Do the materials convey a sense of responsibility if targets are not achieved?

3. Granularity of targets: Are indicators and their targets presented at a detailed level, such as by segment?

Using these three evaluation axes, we applied Google’s “gemini-2.5-flash” model to the full text of each company’s presentation materials, assigning a score from 0 to 100.

For questions 1–3, Gemini’s scoring tended to produce high averages (93.2, 81.1, and 90.3, respectively). However, we also observed occasional extreme outliers, with scores as low as 0 or 5. To address this issue, we converted each company’s score into a percentile value by ranking the scores across the 472 companies and dividing by the universe size.

Summary of All Explanatory Variables

We then compiled summary statistics for each group of explanatory variables, as outlined below.

The high-quality IR firm variable is defined as a dummy, taking the value of 1 for high-quality IR companies and 0 otherwise. Similarly, the slide classification variables take a value of 0 if a given slide type is not included in the materials. The word-level TF-IDF variables also default to 0 when the relevant term does not appear. Consequently, these three groups of variables contain a larger proportion of zeros compared to others, and their medians are therefore 0.

Analysis and Results

Methodology

We applied L1-regularized logistic regression to the dataset described above. L1 regularization simultaneously performs variable selection and prevents overfitting. By adding an “L1 penalty term” to the regression, unnecessary explanatory variables are forced to have coefficients of zero, simplifying the model and enhancing interpretability. In our case, the dataset included 472 companies and 413 explanatory variables (features), which is relatively large compared to the sample size. Thus, incorporating an L1 penalty was deemed appropriate.

Moreover, because the dependent variable is binary (0 = other companies, 1 = high-quality IR companies), logistic regression was chosen. This approach allows us to estimate the probability of a company being classified as high-quality and to score their earnings presentation materials accordingly.

The regularization parameter (C) in the L1 regression was set at 1.1. Smaller values of C yield simpler models but reduce explanatory power, while larger values increase the risk of overfitting. Following the purpose of this study, we adjusted the parameter such that 15 explanatory variables remained, which led to the final choice of C = 1.1.

Results

The explanatory power of the model, as indicated by its scoring metrics, was as follows:

The most intuitive metric is Nagelkerke R², which is an extension of the coefficient of determination (R²) for logistic regression. Interpreting this value broadly, our model can explain roughly 20% of the probability that a company will be classified as a high-quality IR firm based on its earnings presentation materials.

As a result of the analysis, 15 explanatory variables (features) retained non-zero coefficients. Among these, seven variables contributed positively, which we denote as f1–f7 for convenience.

Despite the considerable data constraints, the results highlighted the importance of ROIC, and most of the explanatory variables selected were highly convincing.

While the analysis also identified eight negatively contributing variables, we chose not to present them here, in line with the purpose of this paper: to clarify the elements that make for effective earnings presentation materials. Unlike the positively contributing variables, the negatively contributing ones offered little practical insight.

In this analysis, only 17 out of 472 companies were classified as high-quality IR firms. Accordingly, the dependent variable took the value of 1 for just 17 cases, and 0 for the remaining 455. As a result, the negatively contributing variables tended to be those that simply had non-zero values on average, without providing meaningful differentiation. Put differently, because most companies were classified as 0, the negative contributors merely reflected features that are “commonplace” in presentation materials, rather than attributes that distinguish high-quality IR practices.

Interpretation of Results

ROIC and Segment-Level Performance Disclosure: As indicated by explanatory variables f1 and f2, companies where the term ROIC appears with high importance in presentations, as well as those that include slides disclosing segment-level performance figures, were evaluated more positively.

Bridgestone ranked highest in terms of the TF-IDF score for ROIC. In its relatively compact 22-page presentation, the word ROIC appeared nine times, demonstrating a clear focus on this key KPI—an approach that left a favorable impression.

Kawasaki Kisen Kaisha (K Line) was another example of a high-quality IR firm. Its presentation included slides disclosing segment-level performance data, with quarterly figures and key points clearly summarized.

Management and Accountability: As indicated by explanatory variables f3 and f4, earnings presentation materials that emphasize rigorous management of performance risks and KPIs, and that clearly convey a sense of managerial accountability, are characteristic of high-quality IR companies.
(Note: In this context, “management” refers not to “executives” as individuals but to the act of managing itself—suggesting that both thorough oversight and executive commitment are key factors.)

Mitsui & Co. is a strong example on these points. Its full-year presentation, titled “Medium-Term Management Plan 2026 Progress / FY2026 Business Plan,” communicates a strong intent to manage various aspects such as risk, portfolio, and balance sheet. In addition, its section on “Initiatives for Sustainable Enhancement of Corporate Value” demonstrates concrete actions toward improving ROE and reducing the cost of capital, aligned with stated objectives. Based on such content, it is likely that Gemini scored the company highly in terms of “conveying management accountability when targets are not achieved.”

Comprehensiveness of Materials and Use of English: As shown by explanatory variables f5 and f6, companies with more slides or more comprehensive appendices also tend to be recognized as high-quality IR firms.

An especially interesting finding comes from variable f7: despite analyzing Japanese-language presentation materials, the proportion of English text within them was positively associated with high-quality IR firms.

This likely reflects two patterns:

• Intentional visibility for overseas investors (e.g., adding English for accessibility), and

• Routine use of English in KPIs or job titles (e.g., referring to “CFO” instead of “Chief Financial Officer” in Japanese).

In other words, companies that are consistently mindful of communication with overseas investors and global offices may naturally end up with a higher proportion of English in their materials.

While simply adding more English text does not necessarily improve presentation quality, the fact that this variable emerged as significant is noteworthy.

Mitsui Fudosan exemplifies this characteristic. Its 92-page presentation provides rich information, including long-term performance trends and market data. Particularly rare and well-received is the inclusion of extended time-series data on non-financial indicators. Although the company separately prepares a full English version of its presentation, even the Japanese version incorporates bilingual elements—presumably to facilitate understanding by overseas investors.

Conclusion and Future Challenges

In conclusion, this analysis was able to extract the key characteristics of earnings presentation materials prepared by high-quality IR companies. Specifically, such firms tend to:

• Disclose ROIC and other critical KPIs,

• Provide detailed segment-level information, and

• Convey management’s clear commitment to their goals.

In addition, the sheer number of slides and the presence of English text also emerged as meaningful features.

That said, the study has several limitations. First, the dependent variable—whether a company is recognized as a high-quality IR firm—was somewhat subjective, as it reflects the judgment of a limited number of analysts and investors. Second, the use of text analysis meant that the number of candidate explanatory variables was very large (413 features). Nevertheless, the fact that the seven positively contributing variables identified were almost all intuitively convincing is a surprising and encouraging outcome.

At the same time, a number of challenges remain. For example, the qualitative question scores in Explanatory Variable Group 4, which relied on Gemini’s assessments, proved problematic—two out of the three questions were ultimately discarded by the model. Furthermore, important KPIs such as WACC and Cost of Equity, which we regard as critical, did not remain as explanatory variables. This may be because disclosure on these metrics is still insufficient.

While this analysis focused on 472 companies within the TOPIX 500, we successfully built a system that could be applied across all listed companies to generate insights on how IR materials might be improved. Looking ahead, we also aim to extend the same framework by using valuation indicators as dependent variables, in order to visualize how qualitative aspects of a company’s disclosure impact valuation.

Services We Can Provide in Relation to This Study

Based on the findings of this report, we are able to offer the following services to both issuers and investors:

For Issuers

• Free services: We provide issuers with evaluation scores of their presentation materials as well as consultations regarding IR practices.

• Paid services: Beyond scoring, we can give concrete recommendations on slides that should be added to presentation materials and assist in calculating KPIs that should be highlighted.

For Investors

• While this study focused on companies within the TOPIX 500, we are preparing to build a database covering all TSE-listed companies.

• In the next phase, we plan to analyze the impact of qualitative disclosure features on valuation by using sector-relative PBR as the dependent variable.

• We can also conduct customized screening on a paid basis. For example:

  • Identifying companies with slides that communicate a message similar to a particular page of another company’s presentation.

  • Searching for companies whose slides emphasize themes such as “management focused on ROIC.”

• We have constructed a database of the vectorized slide data used in this study. The database itself can be made available for purchase upon request.

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Note: The services described above may be discontinued without prior notice. Our role is strictly limited to providing information. We do not engage in activities that would constitute solicitation under Japan’s Financial Instruments and Exchange Act, such as making investment recommendations or presenting target stock prices.