TOKYO (Reuters) -The Tokyo Stock Exchange's role from now on is to facilitate constructive dialogue between companies and investors rather than mandate how businesses are run, its head said on Thursday.

"The real power to bring about change lies with investors and shareholders," Hiromi Yamaji, chief executive officer of Japan Exchange group, which operates the Tokyo Stock Exchange, told a press briefing in Tokyo.

The exchange's efforts to encourage companies to improve their governance practices and corporate value have boosted domestic equities. The Nikkei share average crossed a 34-year high in February this year.

But Yamaji said mandating companies change their management practices could be counterproductive as it can provoke a backlash.

"Reform isn't sustainable unless companies take voluntary action," Yamaji said.

In January this year, the exchange began publishing a list of companies that had disclosed plans to improve their capital allocation and corporate value, which was seen as a move to name and shame those that failed to disclose such plans.

At the end of September, 80% of companies on the Tokyo Stock Exchange's prime market had submitted such plans.

From next year the exchange plans to improve the list by highlighting companies seeking active dialogue with investors alongside providing good and bad examples of shareholder engagement to companies, Yamaji said.

Additionally, investors have a responsibility to engage with companies with a longer-term perspective rather than chasing short-term gains, Yamaji said.

"Our aim to is encourage sustainable growth and mid- to long-term improvement in corporate value," he said.

Yamaji also said he hoped Japanese Prime Minister Shigeru Ishiba would promote policies to stimulate private sector growth and continue his predecessor Fumio Kishida's efforts to encourage a shift from savings into investments.