Kirin shareholders overwhelmingly rejected a proposal by London-based Independent Franchise Partners (IFP), which owns a 2% stake, that it exit businesses outside beer and use proceeds to repurchase shares worth 600 billion yen ($5.54 billion).

The result allows Kirin to push ahead with its diversification into biotechnology, pharmaceuticals and cosmetics as it seeks to offset a decline in beer consumption.

IFP's challenge, however, highlighted weaknesses at Kirin, whose expansion has produced mixed results, analysts said.

One of the director nominees recommended by IFP, corporate governance expert Nicholas Benes, won 35% of shareholders' votes despite opposition from Kirin, suggesting some shareholders agreed the board needed more change.

"It would seem a large percentage of investors want to see more independence on this board," Benes told Reuters.

Kirin will be under pressure to prioritise investor returns, possibly forcing it to concede to less radical demands ahead, analysts said.

"Shareholders other than activists may not support dissidents' proposals all the way, but they may still agree on the direction, and encourage the company to agree to more moderate demands," said Fumio Matsumoto, chief strategist at Okasan Securities.

Prime Minister Shinzo Abe has been pushing for stronger corporate governance in a bid to attract more foreign investment, emboldening those agitating for changes.

POISON PILL

In another proxy fight on Friday, Toshiba Machine managed to push through controversial anti-takeover measures to fend off a hostile bid by a fund backed by veteran activist investor Yoshiaki Murakami.

But the proposal passed with the approval of just 62% of shareholders - close enough to keep the pressure on the former subsidiary of Toshiba Corp.

Murakami has said that while he will drop his hostile bid if the poison pill goes through, he will continue to press for more dividends and share buybacks.

Analysts said that while personalities such as Murakami remained unpopular in consensus-driven Japan, institutional investors are no longer as passive as they used to be.

"Shareholder activism is not easy in Japan's complacent corporate culture, but will continue to increase as that's the global trend," said Masayuki Otani, chief market analyst at Securities Japan.

The number of activist funds operating in Japan jumped to 36 in 2019 from just seven five years ago, according to data from IR Japan Holdings.

Shareholders in SoftBank Group Corp may already be seeing the benefits.

Activist fund Elliott Management had been pressing SoftBank for $20 billion in stock buybacks by selling down its stake in Chinese e-commerce giant Alibaba.

While SoftBank initially rejected that demand, it has since announced it plans to raise as much as $41 billion to buy back shares and reduce debt.

(Reporting by Makiko Yamazaki and Ritsuko Ando; Editing by Muralikumar Anantharaman)

By Ritsuko Ando and Makiko Yamazaki