By Suryatapa Bhattacharya
TOKYO -- It wasn't too long ago that Japan would have shunned an aggressive foreign investor with ideas on how to shake up a Japanese corporate giant.
But Elliott Management Corp.'s push for change at Japan's SoftBank Group Corp. is likely to benefit from shifts in recent years that have made investor activism in Tokyo commonplace -- and often successful.
Japanese companies are carrying out a record level of share buybacks, bidding wars have broken out for undervalued companies, and investors are feeling emboldened to speak up.
"Shareholders are much more actively voting their shares, and voting against management if they are doing a poor job," said Seth Fischer, chief investment officer of Hong Kong-based hedge-fund manager Oasis Management Co.
Elliott has built up a stake of more than $2.5 billion in SoftBank, the Tokyo-based telecommunications company and technology investor, and is advocating a share buyback of $10 billion to $20 billion, people familiar with the matter said last week. SoftBank said it agreed with Elliott that its shares were deeply undervalued and welcomed the feedback.
SoftBank has drawn particular interest among foreign bargain hunters because the value of its stakes in companies including Alibaba Group Holding Ltd. and Yahoo Japan parent Z Holdings Corp. far exceeds the market capitalization of SoftBank itself.
In some ways, SoftBank isn't a typical Japanese target because of its entrepreneurial founder and chief executive, Masayoshi Son. He is himself one of the largest global investors, including through his control of the $100 billion technology-focused Vision Fund. Mr. Son has long paid heed to his shareholders in a way most Japanese CEOs don't, and last year SoftBank carried out Yen600 billion ($5.5 billion) in buybacks.
Still, the same forces that have pushed change at other Japanese companies are likely to apply to SoftBank as well. The government of Prime Minister Shinzo Abe sees corporate-governance improvements as a way to revitalize the economy, and traditionally quiet Japanese institutional investors such as life insurers and banks are under pressure to monitor more closely the companies in which they invest.
That has helped initiatives by foreign-based activists bear fruit in the past few years. San Francisco-based hedge fund ValueAct Capital took a 5.5% stake in medical-equipment maker Olympus Corp. and successfully pushed to get a ValueAct partner on the Olympus board.
And a bidding war under way for Tokyo real-estate company Unizo Holdings Co. shows the attractiveness of undervalued Japanese names for foreign investors. Blackstone Group Inc. and Lone Star Funds are among the foreign private-equity funds vying for control of Unizo. Elliott itself has taken a 13.1% stake in Unizo and called on the company's directors to ensure that shareholders are treated properly in the takeover battle.
"I think this year will finally see a foreign activist successfully take over an asset-rich company -- very likely that company will be Unizo," said Nicholas Smith, an equity analyst with CLSA.
Mr. Fischer said last year he used Japan's stewardship code to persuade one of the companies in which he invested to buy back more shares, raise its dividend and invest in information technology.
The activism has spread to Japanese investors as well, suggesting that the pursuit is no longer just for foreigners. Last year, Itochu Corp. successfully used a hostile bid to increase its stake in sportswear maker Descente Ltd. to 40%, enabling Itochu to install one of its own executives atop Descente.
Foreign investors say the attitude of senior executives has changed. Previously, they say they had to seek out meetings and press their proposals on a reluctant audience. Now executives are the ones seeking out meetings with activists, with the goal of anticipating demands and getting ahead of them.
CLSA's Mr. Smith described Japan as the biggest market for activists outside the U.S. and said activist investors have told him they have more people in Japan than in any other country.
He keeps a count of activist-related activities such as making a proposal to management or voting against management at shareholder meetings. Last year there were 75 in Japan, a new high, he says, and already the number this year is nine.
Write to Suryatapa Bhattacharya at Suryatapa.Bhattacharya@wsj.com