The president of Japan’s second-biggest banking group has put up a defence of cross-shareholdings, which have been blamed by the government for sustaining a culture of complacent managers and low returns.

Listed companies in Japan have long held shares in each other as a way of cementing business relationships. But the administration of Shinzo Abe, prime minister, has attacked such cosy arrangements, arguing that unwinding both unilateral and mutual cross-holdings could boost the country’s growth potential by subjecting executives to tougher scrutiny from investors.

Under a new corporate governance code published in draft form this month, big listed companies will be required to evaluate the risks and returns of their cross-holdings on an annual basis and to provide “a detailed explanation of their objective and rationale.” The requirement should result in lower cross-holdings over time, according to a senior government official.