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Cash-Hoarding Japan CEOs Made Index Pariahs in Abe Plan

In Japan, where company strategies curtail return on equity to half the global average, the government has a new weapon to shame chief executive officers into boosting returns: a stock index.

The JPX-Nikkei Index 400, an investment gauge with members selected for their profitability and use of cash, was started in Tokyo earlier this month. It’s the brainchild of officials in Prime Minister Shinzo Abe’s Liberal Democratic Party, who said they advised Japan Exchange Group Inc. in formulating the measure after outlining a version in campaign literature published in 2012. Companies on the broader Topix index posted an average return on equity of 6 percent over the 10 years through 2013, compared with 12.6 percent for the MSCI World Index, data compiled by Bloomberg show.