Core Viewpoint - Japan's stock market has reached all-time highs in 2026 due to significant regulatory changes and improvements in corporate governance [1][3]. Group 1: Market Performance - The Nikkei 225 index achieved a new all-time high in January 2026, recovering from the "lost decades" post-1989 crash [2]. - Over the past five years, the TOPIX index has increased by 93.3%, while the Nikkei 225 index has risen by 84.3%, both outperforming the S&P 500 index, which is up 79.2% [2]. Group 2: Corporate Governance Changes - Recent reforms in Japan's corporate governance have been pivotal in driving stock market performance [4][7]. - The traditional keiretsu system, characterized by interlinked partnerships and cross shareholdings, has been criticized for inefficiency and lack of competition [5][6]. - The Financial Supervision Agency (FSA) and the Tokyo Stock Exchange have implemented reforms to discourage cross shareholdings, leading to a trend of companies selling off these holdings since fiscal year 2020 [7]. Group 3: Investment Opportunities - The new corporate governance reforms are fostering a more competitive and dynamic economy in Japan, encouraging companies to focus on shareholder value [8]. - American investors can consider the iShares MSCI Japan ETF (EWJ) as a means to invest in Japan, which has outperformed the S&P 500 index with a 25.9% increase compared to the S&P 500's 13.7% [9]. - The iShares MSCI Japan ETF includes 181 holdings in top Japanese companies, such as Toyota, Sony, Hitachi, and major financial firms, with an expense ratio of 0.49% [10].