Japan Intensifies Scrutiny of Companies’ Cross-Shareholdings

Japan is increasing pressure on companies with extensive cross-shareholdings.

The government wants companies to be more transparent about why they hold stakes in other firms. The practice has long been criticized as contributing to poor corporate governance by protecting management.

The country’s Financial Services Agencyrequires companies to list their top 60 shareholdings considered strategic and to provide reasons for owning each stock. It suspects some companies of evading disclosure by masking cross-shareholdings as being owned for purely trading purposes.

“There are alleged cases of shareholding washing,” said Tatsufumi Shibata, deputy director-general at the FSA. “It’s unclear how ...