Private Equity - Japan

Japan

The deal value in the Private Equity market is projected to reach €42.52bn in 2024.
It is expected to show an annual growth rate (CAGR 2024-2025) of 1.74% resulting in a projected total amount of €43.26bn by 2025.
The average size per deal in the Private Equity market amounts to €159.20m in 2024.
From a global comparison perspective it is shown that the highest deal value is reached in the United States (€545,100.00m in 2024).
In the Private Equity market, the number of deals is expected to amount to 296.60 by 2025.

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Analyst Opinion

The Private Equity market in Japan has seen negligible growth recently, influenced by factors such as a cautious investment climate, regulatory challenges, and a lack of compelling exit opportunities, which have collectively hindered more robust expansion in the sector.

Customer preferences: In Japan, there is a notable shift towards sustainable and socially responsible investments, as consumers increasingly value companies that prioritize environmental, social, and governance (ESG) criteria. This trend is driven by a growing awareness of climate change and social issues among younger demographics who prefer brands that align with their values. Additionally, the aging population is influencing demand for innovative healthcare solutions, prompting private equity firms to explore investments in health tech and elder care services. This evolving landscape emphasizes the importance of responsible investment strategies.

Trends in the market: In Japan, the private equity market is increasingly focusing on sustainable investments, with firms actively seeking opportunities in companies that demonstrate strong ESG practices. This shift is supported by rising consumer demand for transparency and accountability in business operations. Furthermore, as Japan grapples with an aging population, private equity is investing more in health tech innovations and elder care services, aiming to address the complex needs of this demographic. These trends are significant, as they not only drive financial returns but also contribute to societal well-being, positioning investors as leaders in responsible capital allocation.

Local special circumstances: In Japan, the private equity market is shaped by unique cultural values that prioritize harmony and long-term relationships, influencing investment strategies and stakeholder engagement. The regulatory environment encourages sustainable practices, with government initiatives promoting ESG compliance among corporations. Additionally, Japan's geographical challenges, such as a shrinking workforce in rural areas, drive private equity firms to invest in innovative technologies that enhance productivity and address labor shortages. These local factors create a distinctive landscape for private equity, emphasizing responsible investment aligned with societal needs.

Underlying macroeconomic factors: The private equity market in Japan is notably influenced by macroeconomic factors, particularly central bank policies and interest rates. The Bank of Japan's sustained low-interest-rate environment encourages borrowing and increases liquidity, making capital more accessible for private equity firms seeking to finance acquisitions and growth initiatives. Additionally, a stable yen contributes to favorable foreign investment conditions, attracting global capital into the market. However, fluctuating rates can also impact valuations and exit strategies, compelling firms to adapt their investment approaches. Furthermore, macroeconomic indicators such as GDP growth and consumer spending play a crucial role in shaping market sentiment and investment opportunities, underscoring the interplay between central bank policy and private equity performance.

Methodology

Data coverage:

The figures are based on deal value, number of deals, the average size of each deal, and assets under management within the Private Equity market.

Modeling approach / Market size:

Market sizes are determined through a combined top-down and bottom-up approach, building on a specific rationale for each market segment. As a basis for evaluating markets, we use annual financial reports of key players, industry reports, third-party reports, and publicly available databases. In addition, we use relevant key market indicators and data from country-specific associations, such as: GDP, total investment (% of GDP), household wealth (per Adult), high income (% of population), and number of high-net-worth individuals (HNWI). This data helps us estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. In this market, we use the HOLT-damped Trend method to forecast future development. The main drivers are total investment (% of GDP), household wealth (per Adult), number of high-income persons, and number of high-net-worth individuals (HNWI).

Additional notes:

The market is updated twice a year in case market dynamics change.