Japanese firms have for years lagged behind those in the West on such measures as profitability and return on equity. Japan’s government is attempting to energize the economy with corporate reforms and monetary easing by the Bank of Japan. So far, the government has been successful in getting Japan’s institutional investors and companies on board with such issues as people management, corporate governance, and cash management.

Japan, the third largest economy in the world, is an important market for investors and fund managers alike. But Japan as a country is not very welcoming for shareholders. Lately, though, Japan’s government is attempting to introduce vitality to Japan’s economy and encourage companies to change their ways of doing business.

The government has introduced a new corporate governance code calling for appointing outsiders to boards. Monetary easing by the Bank of Japan to help boost the economy is another step in the right direction. The code for institutional investors is giving them more power to demand that companies improve their returns.

Companies are making efforts to impress empowered investors and the market by buying back shares, increasing their dividends, allowing outsiders on their boards, untangling complex shareholding patterns, and shifting to performance-related pay structures.

Although Japan’s government wants to help boost its economy through corporate reforms and expansionary monetary policy and companies are responding in various ways, it is still uncertain whether Japan has the will to make the hard decisions that are needed to restore its competitiveness.