Yoshiaki Murakami has resigned his position as head of the eponymous Murakami Fund and owned up to insider trading violations. This admission pre-empts his likely arrest and follows the discovery of incriminating meeting notes written by LivedoorÆs president Takafumie Horie.

Can this be characterised as æOld JapanÆ protecting itself by conspiring to squelch the young upstarts? The evidence suggests that in truth they nobbled themselves, as HorieÆs notes discussed their joint collaboration in stock purchases in Nippon Broadcasting. This has emerged as the æsmoking gunÆ. The Japanese media has responded with glee at seeing an upstart knocked into place.

The press has criticised him for æmeddlingÆ in corporate affairs, notwithstanding that these were companies in which he had legitimately invested substantial amounts of money.

Although the government has a clear case, will the punishment of the marketÆs most vocal and high profile activist lead to a sea change for those activists who are playing by the rules? Industry sources say no: ôBeyond Murakami, there are still huge capital allocations flowing into Japanese activist strategies,ö says Nicholas Smith, research director of Falcon Pacific Capital Management.

With that weight of money, the economics suggest the strategy will remain in vogue. The challenge isnÆt the regulatory environment, itÆs finding enough investment opportunities to accommodate the volume of inflows.

A Japanese hedge-fund manager with a corporate governance orientation told AsianInvestor that Japan Inc still has to undergo rites of passage with the way its listed companies operate, and that even though the æGod of Corporate GovernanceÆ û Murakami û is now exiting the stage, the momentum for change remains and law-abiding hedge funds will continue to drive that.

This executive adds that it would move the entire issue forward if investigators also looked at companies that selectively leak critical information rather than just focus on the investment community.

Compared to Murakami, other activist funds fly lower on the radar screen and do not attract the same level of publicity. ThatÆs not to say that they soft-pedal the tactics of their activism, but rather that they donÆt broadcast it to the same extent as Murakami did.

RegulatorsÆ interest in Murakami came to light recently when he and his partner, Kenya Takizawa, announced plans to relocate to Singapore, which prompted Kaoru Yosano, minister of the Financial Services Agency, to warn that investment funds relocating elsewhere would still be subject to Japanese regulations if they operated onshore.

Murakami came to public attention with a campaign to reform Hanshin, a railway operator, but the attempt to use his equity stake to shake up the companyÆs management has emboldened many companies to take defensive actions against activists.