Foreign activists returning to Japan amid a push for better governance will get no further than they did the last time by shouting for change.

That’s the view of Alex Treves, the head of equities at Fidelity Worldwide Investment in Tokyo. Even as company executives heed the government’s call to use capital more efficiently, they won’t put up with activists who piggyback on the governance push by aggressively making demands, he said.

About a decade ago, Japan Inc.’s propensity to hoard cash and tolerate low profits made it a target of activist funds who saw room for improvement. Instead of easy pickings, they found an establishment that mostly refused to listen.

Now lawmakers are pushing to make firms more daring, calling for many of the same changes that activists have sought.

“They’re making a mistake if they assume the changes in governance means that they can go back to their old ways of shouting at companies,” Treves said in an interview in Tokyo on June 10. Fidelity oversees $285 billion in assets.

“The assertive approach to Japanese management isn’t going to work any better just because we’ve got a more general improvement in corporate governance,” he said.

Governance has become one of the pillars of Prime Minister Shinzo Abe’s “third arrow” measures. Since he took office in December 2012, the nation started a stock index designed to shame executives into improving profit, a stewardship code to get investors to push for better returns and a set of rules to make companies themselves more focused on shareholders.

There are already signs it’s working. More than 94 percent of companies had at least one outside director as of this month, according to Institutional Shareholder Services Inc. That compares with 72 percent in December, the proxy adviser said, citing an analysis of more than 2,500 firms that it covers.

Bullish Japan

For Treves, that progress is one of the reasons he’s bullish on the nation’s shares. He also points to prospects for wage increases that will buoy consumer spending, inflation that will encourage companies to spend their cash, and valuations that look good historically and compared with other markets.

“The key to the third arrow is the focus on corporate governance, which I think was very under-appreciated six months ago, and is more appreciated by markets now, insofar that it gets companies thinking about returns,” he said. “For equity investors that’s very, very important.”

The 41-year-old, who hails from London, favors consumer discretionary and technology companies, while holding less materials shares than the benchmarks he tracks. Fidelity sees ROE at Japanese companies rising to the “low teen” levels in two years. That compares with 8.2 percent for the Topix index at the end of March. While the pressure to change is coming from within Japan, one of the motivators may lie beyond its borders.

“The balance of power in the region with China on the one hand is absolutely focusing political minds here on the need for growth, and on the need for general reform,” Treves said. “Corporate governance reform is one of the ways to get that done.”

The renewed focus on better profitability and more efficient use of cash has struck a chord with overseas investors. Successful forays from Third Point’s Daniel Loeb to Oasis Management’s Seth Fischer have come without the acrimony that characterized similar gambits last decade.

Loeb took on the secretive robot-maker Fanuc, which later said it would pay more to shareholders and start an investor relations department. Fischer is targeting Kyocera Corp. and Canon Inc. after calling for the strategy U-turn unveiled in March by Nintendo Co.

Educate Japan

Activist shareholders had scant success in Japan before the financial crisis. Steel Partners Chairman Warren Lichtenstein famously said that he went there to educate its executives, a remark that went down badly with Japan Inc.

While Japan’s new attitude to corporate governance borrows from the activist playbook, that doesn’t mean the country is any less averse to aggressive demands for change, Treves says.

“The whole point about the governance improvement being very much driven within Japan means that Japan will continue to operate within a Japanese cultural framework,” he said. “I don’t think that’s been overturned.”