Japanese corporates are notorious for hoarding cash, but there's a revolutionary shift underway, with shareholder returns set to reach their highest level ever this fiscal year, according to Goldman Sachs.
"Faced with growing pressure to improve capital efficiency, Japanese companies have become increasingly conscious of corporate governance and the need to deliver higher returns to shareholders as their earnings have recovered," Goldman Sachs wrote in a note published over the weekend.
Annual dividends are forecast to reach a record high of 9 trillion yen ($76 billion) in the fiscal year ending March 31, up from 8 trillion yen last year. Japanese companies have announced share buybacks totaling 2.5 trillion yen between April and December 2014, up 116 percent on year.
A corporate sector that is more proactive about shareholder returns is "quite revolutionary in Japan's context," Kathy Matsui, managing director and chief Japan strategist at Goldman Sachs, said in an interview with CNBC on Monday.
The government, under Prime Minister Shinzo Abe, has taken it upon itself to drive a shift in corporate behavior.
Corporate governance reform is a part of the so-called "third arrow" of Abenomics – Abe's three-pronged strategy to revive the economy – alongside other a host of structural reforms including increasing labor market flexibility and opening up the agricultural sector to foreign competition.