Toyota Motor Corp.’s potential unwinding of up to about 3 trillion yen (around US$19 billion) in strategic shareholdings held by banks and insurers is drawing attention across Japan’s financial sector, including among insurance groups that have been cutting back cross-shareholdings under regulatory and governance pressure. The proposed transaction – which is still being discussed and could change – would involve one of the larger recent reductions of cross-shareholdings at a single issuer and may influence how Japanese insurers balance equity exposure, capital efficiency, and supervisory expectations.

Toyota’s plan focuses on cross-shareholding reduction

People familiar with the situation told Reuters that Toyota is working on a framework that would allow financial institutions, including banks and insurance companies, to dispose of substantial holdings in the automaker. The value of shares sold could be around 3 trillion yen, although the final figure will depend on the participation of individual shareholders, the people said. Toyota is considering repurchasing part of the shares, while a secondary sale to other investors is also under review, according to one of the people. The timing has not been finalised, but the company is understood to be targeting a transaction that could take place as early as this year. The plan could be reduced, reshaped, or cancelled depending on market conditions and shareholder interest.

Toyota has not publicly commented on the reported planning. The people providing information requested anonymity because the discussions are not public. The automaker has long maintained cross-shareholding ties with major financial institutions and in recent years has stated that it intends to reduce such holdings. The potential sale is emerging as regulators and the Tokyo Stock Exchange continue to urge listed companies to unwind cross-shareholdings, a structure that some governance specialists and overseas investors argue can dilute shareholder oversight and allocate capital inefficiently.

Insurance portfolios and capital management considerations

Toyota’s shareholder list includes Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group, and MS&AD Insurance Group, among others. For insurers with significant equity portfolios, participation in any sizeable disposal of Toyota shares could affect realized gains or losses, regulatory capital ratios, and asset-liability profiles. Non-life insurers in Japan have for several years been setting out policies to reduce equity holdings, responding to market volatility, solvency rules, and rating-agency views. A large transaction in a name such as Toyota could contribute to a continued shift toward portfolios with lower equity concentrations and greater use of fixed income and alternative assets aligned with long-duration liabilities.

The review of shareholdings comes as Toyota is running a tender offer for Toyota Industries Corp., a forklift and industrial-equipment manufacturer. The offer has been opposed by activist investor Elliott, which has argued that the price is too low and that the process lacks transparency. Toyota has extended the bid period to March 2 after uptake fell short of earlier expectations, reflecting broader scrutiny of governance, valuation, and shareholder rights in Japan’s equity market.

Life sector outlook shaped by demographics and regulation

The potential changes in insurers’ investment books are taking place alongside a period of projected growth for Japan’s insurance market. GlobalData forecasts that the industry will expand at a compound annual growth rate (CAGR) of 3.9% from 54.3 trillion yen (US$386.7 billion) in 2025 to 63.4 trillion yen (US$470.3 billion) by 2029. Life insurance is the dominant line, accounting for 77.4% of total premium income in 2024, with general insurance at 22.6%, according to GlobalData. Demographic dynamics and product realignment are expected to be important factors over the medium term. “The Japanese economy is expected to contract by 0.9% in 2024 after growing by 1.9% in 2023, which is expected to slow down the growth of the insurance industry. However, economic recovery, rising demand for yen-denominated insurance products, and premium price increases across life and general insurance segments are expected to support the industry’s growth in 2025,” Swarup Kumar Sahoo, senior insurance analyst at GlobalData, said.

General insurance outlook and risk trends

GlobalData expects Japan’s general insurance segment to grow at a 2.2% CAGR between 2024 and 2029. The expansion is projected to be supported by premium rate increases, greater take-up of cover for natural catastrophe risk, and a rise in demand for liability policies, including cyber and workers’ compensation. At the same time, slower growth in motor insurance – which represents nearly half of general insurance premium income – is likely to limit overall expansion in non-life. Technology changes, usage patterns, and competitive dynamics are among the elements influencing motor performance.

Natural catastrophe experience remains a central concern for domestic carriers and global reinsurers with exposure to Japan. “The increase in the frequency and severity of extreme weather events in recent years has led to a rise in claims. As a result, insurers are expected to reassess their risk exposure, potentially leading to higher insurance premium rates across general insurance lines in 2025,” Sahoo said. Since 2020, the General Insurance Rating Organization of Japan has periodically raised the nationwide average “reference net rate” for personal fire insurance, reflecting higher payouts linked to a series of natural disasters and increased repair and reconstruction costs.

Within general insurance, liability business is expected to post relatively higher growth in 2025, supported by corporate demand for cyber insurance and workers’ compensation coverage. For Japanese insurers, the interaction between Nat-cat risk, liability exposures, and any reallocation away from equity stakes such as Toyota is likely to inform decisions on risk appetite, reinsurance structure, and capital deployment in Japan and across Asia. Sahoo said Japan’s insurance sector is “on the verge of transformation, driven by demographic shifts and evolving consumer preferences,” adding that market volatility, regulatory adjustments, and frequent natural catastrophe events will require insurers to develop flexible strategies “to sustain growth and profitability over the next five years.”