(Bloomberg) — A notice buried toward the back of a Tokyo Stock Exchange document last month encouraging better corporate governance has led to some big share price moves.

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The Japanese bourse said it will request companies trading below book value to come up with capital improvement plans starting this spring. While just the latest in a long series of such directives from the TSE, corporate and market response has been surprisingly quick.

Citizen Watch Co., which had been trading below book for nearly five years, surprised investors last week with plans to buy back a whopping 25.6% of its shares. The timepiece maker, which acknowledged the TSE’s stance, has seen its stock surge more than 35% since then.

“The pace of change here is accelerating at a level that our team members haven’t ever seen in the last 60 years of our collective investment experience in Japan,” said Emily Badger, a portfolio manager at MAN Group. “We think this is a really exciting opportunity for Japan.”

Among other moves, automaker Honda Motor Co. is up about 10% since it announced plans to repurchase more than $500 million worth of its stock earlier this month. Shares of glassmaker AGC Inc. have rallied more than 8% since it announced a buyback.

The bourse suggested to a panel of experts in February that companies come up with a plan to improve corporate value at least once a year. The exchange’s spokesman said that it plans no punishment for companies that fail to do so.

Addressing Undervaluation

Almost half of TSE Prime Market Index members trade below book, compared with just 3% of the S&P 500 Index. Even among Japanese blue chips, about one-third of Topix 100 stocks have price-to-book ratios below one, including Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc.

The large number of companies trading below book value — suggesting investors lack confidence in companies’ profit-generation ability — has been seen as a root cause of underperformance. The benchmark Topix is up about 130% since the end of 2008 versus roughly 340% for the S&P 500.

The problem is Japan Inc. dogma dating back to the country’s economic crisis in the late 1990s, with companies resisting shareholder return improvement in favor of accumulating cash. Sporadic campaigns by activist investors have met with limited success.

The TSE and its parent Japan Exchange Group Inc. have undertaken a yearslong effort for change, including the implementation of a corporate governance code in 2015 and a major market overhaul more recently. But some market experts believe this time may be different.

“I think a lot of companies are feeling nervous now — it’s not that activists’ proposals will be easily accepted, but I’m sure there will be far more opportunities,” said Yasuo Sakuma, chief investment officer at Libra Investments. “It’s becoming hard for companies to come up with excuses.”

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