Japan's share of all private equity and venture capital investments in Asia-Pacific grew in 2024 as the value of private equity deals targeting Japanese companies surged.

The value of private equity- and venture capital-backed investment in Japan increased 40.8% year over year to $17.90 billion in 2024, according to S&P Global Market Intelligence data. The amount was equal to 15.6% of all private equity and venture capital investments in Asia-Pacific in 2024, a share that grew from 10.6% in 2023.

Momentum is expected to continue in 2025, pushing private equity transaction value — and the competition among firms hunting deals — even higher this year, said Hajime Koyanagi, general manager of the investment strategy department at Nihon M&A Center, a Japanese advisory firm. Investors and regulators have pressured Japan's major corporations to improve their capital efficiency, resulting in a slew of take-private and carve-out opportunities for private equity firms.

"More and more foreign funds are making inroads into Japan as they see more room for Japanese companies to improve extremely low productivity," Koyanagi said.

Behind the surge

Part of Japan's appeal derives from clear paths to value creation, such as boosting the low-profit margins of Japanese companies or helping them expand beyond the domestic market, said Nick Wall, a Tokyo-based partner at law firm Allen Overy Shearman Sterling LLP with a focus on cross-border M&A.

"Japanese corporates have incredible technology, but they have perhaps struggled to market it outside of Japan. [Private equity] definitely sees opportunities there," Wall said.

Gavin Geminder, global head of private equity for KPMG LLP, said Japan's low interest rates mean cheaper financing for deals.

"There's no economy in Asia with the type of interest rate environment that Japan has, so borrowing money is obviously super-cheap," Geminder said.

– Download a file of raw data from this story. – Read about declining private equity-backed deal value in India and mainland China. – Catch up on private equity exit activity.

A widespread succession crisis affecting Japan's large number of family-owned businesses is also creating opportunities for private equity to invest in Japan's middle market, added Satoshi Ishiguro, an executive director at Daiwa Corporate Advisory Ltd. specializing in cross-border transactions. At the same time, Japan's business community is overcoming a longstanding aversion to partnering with or selling to private equity, Ishiguro added.

Wall, who arrived in Japan over three decades ago, said the shift in attitude means the opportunities for fund managers to invest in Japan are multiplying.

"In the '90s, one of the things you heard a lot from foreign investors is, 'I'd love to invest in Japan but there aren't any assets to buy.' And that is changing," Wall said.

Largest deals

KKR & Co. Inc.'s $3.9 billion acquisition of a 33.57% stake in software developer Fuji Soft Inc. was the largest private equity deal in Japan in 2024, according to Market Intelligence data. It was the first step in KKR's two-part plan to take Fuji Soft private, and its follow-up offer of $2.6 billion to acquire the remaining stake ranked as the third-largest Japanese private equity deal of the year.

Ranking between those two KKR investments was a $2.8 billion take-private deal for real estate business SAMTY HOLDINGS Co. Ltd., led by Hillhouse Investment Management Ltd. and Rava Partners.

Japan-based private equity and venture capital firms invested in just two of the 10 largest deals: the $388 million acquisition of automotive retailer BigMotor Co. Ltd., renamed WECARS Co. Ltd.; and the $211.7 million funding round for AI research business Sakana AI K.K.

Fundraising and outlook

Japan-focused private equity funds raised $8 billion in 2024, matching their 2023 fundraising haul, according to Preqin Pro data. This figure is well above the $5 billion average annual fundraising total over the decade ending in 2024.

The stockpiling of capital raised but not yet invested indicates that private equity sees more opportunities in Japan.

"2025, barring some geopolitical change impacting M&A globally, is going to deliver a record year for Japan," Geminder said.