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The seeds of corporate governance reform in Japan go back to the country's bank crisis of the 1990s. The debacle weakened the banks, which had been the prime sources of financing for business and therefore the main instruments of corporate governance as the primary overseers of the bottom line. Private borrowing and public markets began to emerge as sources of capital.

Meanwhile, Japanese society was aging rapidly, with individuals who had reached the standard retirement age of 60 expected to comprise some 30 percent of the population by 2030.

“The difficulty was that the finances of these retirees are characterized by high savings but low returns,” says Richard Holbrook, a partner at Crowell & Moring. “As the government became concerned about the post-retirement incomes of its population, the evidence that there is a link between good corporate governance and good returns was mounting, and that was one of the main factors that led to reforms.”