In 2012, Prime Minister Shinzo Abe arrived on the scene with bold plans to remake Asia’s No 2 economy. Although the hoped-for Big Bang hasn’t quite happened, Abe’s team had remarkable success in at least one realm: better corporate governance.

Now, the moment which Japanese stock aficionados have long dreamed has arrived. Pressure on CEOs to champion shareholder value and raise returns on equity are paying off with a bull market in dividends.

Even better, it may be just beginning.

Those are the signals emanating from Nomura, one of Japan Inc’s most fabled investment houses.

Its analyst reckons that dividends doled out by blue-chip companies grouped in Tokyo Stock Exchange’s first section hit the US$133 billion mark in August.

That’s more than twice what companies were shelling out in 2012. And this windfall is coming even as the global trade war crimps growth and economists warn of a rocky 2020.

This raises two pivotal questions. First, can the dividend surge continue? Second, what’s the catch?

Is the windfall sustainable?

The answer to question No 1 is “yes.”

A key Japan Inc attraction is that even if dividends lag the US, they are consistent. American companies often pay punters erratically owing to vagaries in the profit cycle. At the moment, the average US payouts are low, at 1.87%.

Japan’s dividend renaissance, meantime, is starting from a low base. The average dividend yield of Tokyo Stock Exchange-traded companies is about 2.10%, according to research firm CEIC Data. That compares with 4.24% in Taiwan, 4.13% in the UK, 3.89% in Australia, 2.63% in Germany, 2.19% in China and 2.13% in South Korea.

Companies in Japan have customarily been infamous cash hoarders. This year, data showed the biggest companies to be sitting on the equivalent of upwards of $4 trillion of excess yen. It’s money better spent fattening paychecks or investing in new industries – or, of course, on returning it to shareholders.

What’s the catch?

So it’s grand that Japan Inc is now doing just that. But there’s a dark side to all this that leads us to the “what’s the catch” question. In fact, there are a couple.

One is that Abe’s failure to implement bold structural upgrades left Japan uniquely vulnerable to Donald Trump’s trade war. To date, Abe’s main ploy to stimulate the economy is ultra-loose monetary policy.

Prodding the Bank of Japan to engineer a historic easing program cheered investors and boosted asset prices. The yen’s resulting 30% drop buoyed exporters and corporate profits.

Absent, though, were reforms to increase competitiveness. Abe missed his window to internationalize labor markets, catalyze a startup boom and reduce bureaucracy. Efforts to empower women were milquetoast, at best.

Abe’s failure to remake the economy cost Japan the virtuous reflation cycle he envisioned. The plan all along was trickle-down economics, Japan-style. Companies would share record corporate profits with workers, who would then increase spending to restore Japan to its 1980s heyday. The upgrades never came, leaving executives more inclined to hoard cash.

This dynamic also shows the limits of Abe’s efforts. Not just the failure to instill greater confidence, but the limits of Abe’s success in genuinely changing corporate behavior.

Beneath the great dividend story is a series of scandals reminding us that too much of the old Japan Inc remains. From Nissan to Toray Industries to Toshiba to Mitsubishi Materials, examples of dodgy corporate behavior abound.

Frothy days for stock plays

Even so, companies sharing their Abenomics spoils is a big step in the right direction. Moreover, this trend benefits from the downward direction of global interest rates.

The Federal Reserve’s three rate cuts this year create space for monetary authorities from Europe to Japan to add liquidity. As bond yields creep further negative, investors are sure to favor equities over fixed-income instruments.

From an average price-to-earnings ratio standpoint, Japan looks comparatively attractive.

Its broadest index, the Topix, trades at just over 14 times companies’ forward earnings. That compares to 16 times in Korea, 18 times for London’s FTSE 100 index and more than 20 times for America’s S&P 500.

All of which means Japan Inc’s payouts may only accelerate as total revenue expands. The question is for how long?

With Japan skirting recession and US President Trump threatening taxes on imports of cars and auto parts, profit risks abound. In the longer run, Japan’s demographics threaten consumer-based companies.

And six-plus years into the BOJ’s easing regime, inflation is less than halfway to the 2% inflation target.

The risk is that under-performing domestic and international economies catch up with corporate Japan. In the meantime, it’s incumbent upon Abe’s government and CEOs to raise their competitive game.

For now, though, Japanese companies are finally rewarding investors for sticking with them all these years. So long as politicians and executives get busy remaking Japan, the dividend boom can continue to delight investors.