Megumi Kiyozuka, president of Sunrise Capital, initially aimed to raise $US500 million for his new fund. However, global investors expressed interest in committing as much as $2 billion, a stark contrast to the challenges he faced 12 years prior when raising a smaller fund. This surge in interest reflects a broader shift in perception towards Japanese investments. Kiyozuka noted the change, stating investors previously avoided Japan due to perceived inefficiencies, but now see the same inefficiencies as opportunities.
Large global investors now view Japanese companies as undervalued assets ripe for improvement. The strategy involves acquiring these companies, implementing operational enhancements, and then selling them at a profit through IPOs or to other buyers. This model, successful in the US, finds renewed potential in Japan due to the relatively weak yen and favourable financing conditions. Data from Deloitte shows there have been 192 private equity deals in Japan so far in 2025, after 292 deals in all of 2024.
According to Azusa Owa, a partner at Bain, Japan offers fundamentally attractive returns. Between 2010 and 2024, Japanese private equity deals surpassed all other global markets in returns, even after accounting for the yen’s depreciation, returning 2.4 times the invested capital. Japan’s vast economy, with nearly 4000 publicly traded companies, presents numerous targets for private equity firms. These companies often have substantial cash reserves and opportunities for streamlining or asset sales. Also, Japanese companies have relatively low debt, making it easier for new owners to boost returns by borrowing.
Japanese banks are willing to lend, with leveraged-buyout financing costs significantly lower than in the US. This advantage enables funds to increase returns through strategic borrowing. Eiji Yatagawa, a partner at KKR’s Japan office, suggests that Japan is still in the early stages of its private equity development, indicating further growth potential in the market.
