Net-Net Stocks in Japan: Why There Are So Many

How many net-nets are in Japan?

The count changes every day with prices and new filings, but Japan has dominated global net-net lists for a long time. When James Montier of Société Générale tested Graham's net-net strategy across developed markets in 2008, he found around 175 net-nets worldwide, and more than half of them were Japanese. Our own global net-net screener lets you filter by country to see today's Japanese list.

Why Japan has so many net-net stocks

Cash-heavy balance sheets

Many Japanese companies, especially smaller ones, hold large amounts of cash and securities and carry little debt. A common explanation is the long aftermath of the asset bubble that burst in 1990, when credit tightened and managers learned to keep a large cushion. Cash counts in full toward NCAV, so a cautious balance sheet plus a low share price produces a net-net.

Low payouts and few takeovers

For years, many companies paid modest dividends and rarely bought back shares, so cash piled up instead of reaching shareholders. Hostile takeovers, which would pressure a company trading below its cash, were historically rare in Japan.

Cross-shareholdings

Japanese companies have traditionally held stakes in their customers, suppliers and banks. These friendly holdings made management harder to challenge. They are usually recorded as long-term investment securities, so NCAV gives them no value at all, which can make Japanese net-nets even cheaper than they look.

Thousands of small, uncovered companies

The Tokyo Stock Exchange lists thousands of companies, and many small ones have no analyst coverage in English, or at all. Foreign investors have often skipped them, leaving mispricing in place.

The Tokyo Stock Exchange's push on low price-to-book companies

On March 31, 2023, the Tokyo Stock Exchange asked every company on its Prime and Standard markets to manage with an eye on their cost of capital and stock price. Companies were asked to analyze their profitability and market valuation, disclose plans to improve them, and update investors on progress. The exchange pointed to a price-to-book ratio below 1 as one sign that a company was not earning its cost of capital or that investors saw little growth. In supporting material, the TSE noted that about half of Prime Market companies and 60% of Standard Market companies had ROE below 8% and a P/B below 1. It updated the request in April 2026.

For net-net investors this matters because the classic complaint about Japanese net-nets was that the cash never reached shareholders. Pressure from the exchange, along with more active shareholders, gives some companies a reason to raise dividends, buy back stock or sell cross-held shares: exactly the kind of catalyst that closes the gap between price and NCAV. It does not guarantee that any single company will act.

What the research says about Japanese net-nets

One of the first tests of Graham's idea outside the United States looked at Japan. Bildersee, Cheh and Zutshi (1993) studied Japanese stocks from 1975 to 1988 using a looser version of the NCAV rule and found market-adjusted returns of around 1% a month. Montier's 2008 study also included Japan in its regional results. For the full set of studies, see the historical returns of Graham's net-net strategy.

Practical tips for researching Japanese net-nets

• Know where the filings are. Annual securities reports (yūka shōken hōkokusho) are on the Financial Services Agency's EDINET system, and quick earnings summaries (kessan tanshin) are released through the exchange's TDnet service. Many small companies publish only in Japanese, so a translation tool helps.
• Expect March year-ends. Most Japanese companies close their fiscal year at the end of March, so annual results arrive in May and many balance sheets refresh at the same time.
• Check the trading unit. Japanese shares trade in units of 100, so the minimum purchase is 100 times the share price.
• Look past NCAV for hidden value. Long-term investment securities and land (often carried at decades-old cost) sit outside current assets. They don't count toward NCAV, but they can add a lot of value on top of it.
• Count retirement liabilities. Pension and retirement benefit obligations are real liabilities and belong in the calculation.

Risks to weigh

• Some companies have traded below NCAV for many years without anything changing. Cheap can stay cheap.
• Returns for foreign investors depend on the yen as well as the share price.
• Many Japanese net-nets are thinly traded small caps, so buying and selling can move the price.
• Listed subsidiaries controlled by a parent company may be run for the parent's benefit rather than for minority shareholders.

Run every candidate through our 10-point net-net checklist, and diversify across many names rather than betting on one.