Japan Investment Corporation is channeling capital into transformative sectors, fostering innovation, strengthening global competitiveness, and driving sustainable growth across industries while supporting the nation’s long-term economic development and technological leadership.
In recent years, we’ve seen changes in Japan’s corporate environment, business management practices, and the mindset of Japanese executives. How do you view these developments?
As you're aware, over the past five to eight years, Japan’s corporate landscape has undergone a gradual yet unmistakable transformation. Discussions around Price-to-Book Ratios (PBR), relevant guidelines by the Ministry of Economy, Trade and Industry (METI), and other institutional developments have all contributed to this shift. Most importantly, the mindset of Japanese management itself has started to evolve.
Historically, Japan's financial system was firmly underpinned by strong banking institutions. This meant that companies could operate with limited regard for equity markets or shareholder interests. Financing was dominated by stable bank loans, and corporate leaders rarely considered equity a central concern. That period—defined by cross-shareholdings and low market liquidity—meant executives had little reason to worry about changing shareholder structures or shareholder activism.
However, things began to shift after the collapse of Japan’s economic bubble and the financial crisis that followed, which exposed key vulnerabilities in the financial system. The financial institutions that had once provided what was effectively long-term, equity-like capital no longer existed, which fundamentally changed the funding landscape.
In more recent years—especially the last couple of years—foreign investors have come to hold more than half of all Japanese equities. This external presence has prompted Japanese executives to pay more attention to the right-hand side of their balance sheets—not only to assets, but also to capital structure and equity. Government initiatives, pressure from the market to improve PBR, and the emergence of activist investors have all combined to reshape corporate behavior.
In the past, Japanese companies were able to postpone structural reforms. Disclosure requirements were minimal, and stable shareholding structures meant that transparency was rarely demanded. This environment persisted for decades. But in the last five years, corporate leaders have come to recognize that this model is no longer sustainable. We are now seeing concrete changes in behavior across a wide range of firms.
Demographic challenges such as a declining population and succession issues are driving a notable increase in M&A activity—especially among mid-sized companies. This indicates that the way capital is supplied within Japan’s financial and economic systems—and the very nature of corporate financing—is undergoing significant change. I believe Japanese managers have finally come to recognize that a fundamental structural shift is taking place.
At the same time, activist investors are becoming more influential. When I took on my current role at JIC five and a half years ago, there was still widespread resistance to private equity-style investment. Many companies were hesitant to accept funding from firms like ours.
That mindset has changed significantly. Today, more management teams are actively seeking ways to partner with us and use JIC’s investment as a tool for growth. This clearly reflects a growing awareness among Japanese executives of the need to evolve and enhance corporate value. The timing of JIC’s establishment was fortuitous—it coincided with the rise of this transformation.
At JIC, we emphasize that we are not the drivers of reform. The companies themselves are the protagonists. They must make the decisions—whether that means pursuing M&A, spinning off business units, or taking other steps to improve enterprise value. Our role is to support and enable that journey.
The uptick in corporate carve-outs, the rise in M&A activity, and the renewed focus on core operations all indicate that Japanese companies are finally embracing efficiency and transparency. These changes are also creating new opportunities for JIC to support them. The aim is to define clear strategies, concentrate on high-return areas, and boost shareholder value through stronger returns on equity (ROE).
Turning to private equity, can you tell us about JIC’s role in the semiconductor sector, particularly your recent involvement with JSR?
Semiconductors are the foundation of modern industry—they’re often referred to as the “rice of industry” because they support virtually every sector. Globally, countries like the U.S. and those in Europe are reinforcing their domestic semiconductor ecosystems as a matter of national industrial policy. Japan is no exception.
Japan’s semiconductor materials business occupies a global niche and has advanced technological capabilities. However, even major players in the field have a relatively modest scale—around 300 billion yen in annual sales. Given that semiconductor materials are strategically important as the foundation of the entire semiconductor industry, and in order to fully meet supply responsibilities amid rising global demand, we believe structural reforms and business reorganization to secure the necessary scale of investment are essential. That is why we decided to support JSR.
Our acquisition of JSR’s semiconductor materials business wasn’t just about protecting the present. It was about positioning Japan to maintain global competitiveness—by enabling scale and nurturing technological leadership. This involves not only growth but also industry consolidation and positioning Japanese companies to thrive on the world stage.
In recent years, activist investors have become more active in Japan. How do you see this trend evolving?
I’ve engaged with activist investors for over 20 years, going back to my time as the head of an investment banking and securities firm. Activists today are a very different breed from those in the past. While they come in many forms—some more aggressive, some more constructive—the current generation tends to be far more rational and sophisticated. They emphasize metrics like PBR, ROE, and enterprise value, and they demand well-reasoned explanations from management, especially at publicly listed companies.
In that sense, the evolution of activist investment has had a positive impact on Japanese corporate governance. As geopolitical tensions rise—particularly between the U.S. and China—and global supply chains are re-evaluated, Japan is increasingly seen as a stable and attractive investment destination. Funds that previously focused on China are now redirecting capital to Japan, valuing its economic stability and scale, social cohesion, and strong rule of law.
While it’s difficult to predict the future with certainty, I believe that for the next three to five years, Japan will remain an appealing market for both activist and long-term investors, including private equity funds. That said, Japan still faces structural issues such as demographic decline and the economic challenges that come with it.
There are also external risks to consider—supply chain disruptions, currency volatility, and geopolitical friction, particularly in trade relations with the U.S. Adjusting supply chains takes both time and capital, and unresolved trade tensions could weigh heavily on Japanese industry.
Finally, could you share your thoughts on the role of venture capital in Japan and how JIC is contributing to the startup ecosystem?
Venture capital and the broader startup ecosystem are vital to Japan’s future competitiveness, innovation capacity, and economic growth. The government's Startup Development Five-year Plan, launched in 2022 to significantly boost venture investment, has created strong momentum for the sector.
JIC Venture Growth Investments (JIC VGI), which makes direct investments in startups under JIC’s umbrella, has made about 90 cumulative investments over the past four years as of March 31, 2025. JIC invests in venture capital funds in the focus areas of deep tech, life sciences, pre-seed/seed and early , and global expansion (Go Global).
The Go Global initiative is our investment in leading venture capital funds in Europe, the U.S., and Asia, with the goal of encouraging them to support Japanese startups as well. We are also working to cultivate the next generation of Japanese venture capital fund managers. Unlike the U.S. and Europe, Japan lacks a fully developed system for nurturing this kind of talent. Addressing that gap is a priority for us—through education, mentorship, and international collaboration.
The Japanese venture capital market has expanded significantly—growing tenfold over the past decade—but it still trails the U.S. and Europe in quality and scale. That’s why continued government backing, combined with our own initiatives, is so important. We see JIC as a core driver of Japan’s growth strategy, working in tandem with both public and private stakeholders to strengthen the economy through innovation.
In June 2024, JIC’s operational period was extended to 2050. Building a dynamic ecosystem and developing talent takes time. I may not be around to see the results in 2050, but I’m confident that laying this groundwork is essential to Japan’s long-term prosperity.
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