Japan opportunities for foreign businesses

(C) Gerhard Fasol

by Gerhard Fasol

Japan opportunities resulting from change

  • Japan’s energy revolution as a consequence of the Fukushima disaster: Energy deregulation, renewable energy, solar, wind, smart grid, LNG imports.
  • Trade liberalization and resulting structural changes: TPP negotiations and trade partnership negotiations with the European Union
  • Aging society and the growing “silver market”
  • Japan’s communications, mobile internet, SaaS and cloud markets
  • Japan’s education and globalization needs
  • Japan’s new focus on ventures, and especially deep-tech spin-outs from Universities


“Lost twenty years” (or even lost thirty years) followed by Prime Minister Koizumi’s reforms and “Abenomics”

After Japan’s “bubble economy” of the 1980’s burst, for about ten years a period of denial followed, where Japanese leaders hoped and waited that share prices and real estate prices would jump back to bubble-time levels and continue their bubble-style rise. This denial was a major factor for the “lost decade – or two decades” which encouraged Prime Minister Koizumi to reinforce reforms of Japan’s government, legal and economic structure.

After the end of Prime Minister Koizumi’s government the pace of reforme slowed down considerably, however was not reversed as some voices demanded. These changes create new opportunities for many parties, including industrial companies and investment funds. There are several other factors which drive change, such as the globalization of the economy and the internet – which was not planned at all by the Japanese government, but imposed on Japan as a fait-accompli.

Prime Minister Kishida’s “new capitalism”, governance reforms and new opening + record low YEN exchange rate

While Prime Minister Kishida “new capitalism” has been difficult to summarize, Japan’s government actions under Prime Minister Kishida are showing visible results.

Japan’s government taking action to grow ventures, and especially deep-tech ventures and University spin-outs.

Corporate governance reforms are continuing and leading to large improvements of capital efficiency at many (not all) Japanese companies.

Record low YEN exchange rates as a consequence of low Japanese interest rates – and other factors – help Japanese exporters and are also a driving factor for inward investment into Japan and “in-bound” tourism into Japan.

Japan opportunities: Merger and Aquisition (M&A) opportunities

The volume of Mergers and Aquisitions is rising in Japan, and is larger than often assumed: the volume of M&A in Japan is on a similar level as for example in Germany.

The lions share of M&A is within Japan: Japanese companies acquiring or merging with other Japanese companies. One of the largest acquisitions of a Japanese corporation by a foreign corporation in the last years was Israel’s Iscar acquiring Japanese Tungaloy

The three largest acquisitions ever of Japanese companies by EU companies have been Vodafone’s acquisition of J-Phone (transaction value: about US$ 20 Billion in a series of acquisition transactions), Daimler’s acquisition of Mitsubishi Motors (transaction value: about US$ 2-3 Billion), and Renault’s investment in Nissan (initial transaction value: about US$ 3 Billion) – of these three, only the Renault investment in Nissan was successful, while both Vodafone’s acquisition of J-Phone failed, and Daimler’s acquisition of Mitsubishi Motors also failed. In both cases, Vodafone sold Japan-Telecom/J-Phone/Vodafone KK to SoftBank and withdrew completely from Japan (except for a very small liaison office), while Daimler sold its stake in Mitsubishi Motors, but unlike Vodafone continues substantial business in Japan in other fields.

Corporate governance reforms, activist investors, private equity and record low YEN exchange rate

Corporate governance reforms and changes of mind sets have made Japan one of the most important markets globally for private equity and activist investors.

Record low YEN exchange rates lead to increased investments into Japan, and increased “in-bound” tourism

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