Japan became the largest regional private equity market in APAC in 2023 at 30% of APAC deal value (vs. 5-10% historically). Deal value hit an all-time high of JPY 5.9T, nearly 2x more than the high-water marks set in 2022 and 2023. These headline growth numbers are as strong as in the first boom of Private Equity in Japan before the global financial crisis, prompting the question: Is this time different? 

Bain’s presentation explores the market’s headroom for growth, the momentum of the tailwinds it enjoys today, but also some of the challenges the market may face in the coming years. In the last year, the tailwind of corporate governance improvements received new momentum with TSE’s focus on PBR and capital efficiency. Updates to the M&A code are enabling unsolicited bids and emphasize “market checks” on bids that can provide PE an entry into corporate M&A deal processes. As interest in China wanes, funding aimed at Japan is increasing. In-market investors that capitalize on this interest by growing their fund size must be mindful of the implications: their target universe shrinks, and they may encounter different competitors as they chase larger deals. New-to-market investors that are attracted by Japan Private Equity’s success must be mindful what it really takes to succeed. For all investors, the shifts in competition strengthen the imperative for a very pro-active approach to value creation.