Japan’s M&A market had a record 2025, and the momentum is nowhere near stopping. Regulators may yet throw a curveball by tightening scrutiny of transactions deemed national security risks, but 2026 is still shaping up to be transformational for Japanese dealmaking.

The market’s growth has been extraordinary. Japan recorded its largest M&A deal value over the past 20 years in 2025, rising 93% year-on-year to $180bn, shows data from Bain & Company, with outbound M&A from Japan growing 31% year-on-year to $87bn.

That revival had been years in the making. The introduction of the Stewardship Code in 2014, followed by the Corporate Governance Code in 2015, laid the groundwork, with the Tokyo Stock Exchange giving things an extra impetus in March 2023 by asking listed companies to bolster their price-to-book ratios, profitability, and capital efficiency. This fueled M&A as companies shed non-core assets or diversified their businesses, private equity firms sought out new targets, and many corporates decided to go private.

Activist investors have also become a dominant force. Public M&A in Japan accounted for more than half of Asia Pacific’s M&A deal count – the highest in 18 years, according to Ion Analytics – driven in part by a surge in shareholder activism.

This raises an important question: is the dealmaking spree sustainable?

Positive catalysts

The signs show that Japan M&A not only has some real room for growth but could even trump 2025’s record. Despite geopolitical tensions, the year has started on a strong note.

In late March, Japanese semiconductor maker ROHM said it had received an acquisition offer from Toyota supplier DENSO, a deal that could reportedly be worth about $8.3bn if it goes through. In February, Nasdaq-listed analog chipmaker SiTime Corp said it will acquire Tokyo-listed Renesas Electronics Corp.’s timing unit, valued at some $2.9bn.

On the sponsor side, funds of Apollo are looking to take Nippon Sheet Glass Company private in a $3.7bn deal, while KKR is privatizing Taiyo Holdings, an electronic materials maker.

In the 2026 first quarter, Japan M&A deal value stood at $41.7bn, down marginally from the $47.3bn recorded in the final quarter of 2025, but higher than the $34bn in Q1 2025, according to Mergermarket data. 

This is only the beginning. Demographic shifts in Japan mean many more ageing business founders are increasingly willing to sell their firms, while government-led corporate reform initiatives will continue to act as an M&A catalyst.

International interest – including from private equity firms – remains strong. A combination of cheaper yen making valuations attractive for cross-border investment, and the appointment of a new prime minister in late 2025, have made dealmakers bullish about the country’s prospects.

AI, chipmaking, advanced manufacturing, and semiconductors will remain firmly on dealmakers’ radars, aligned with Japan’s priority sectors under its new budget.

Turning regulatory scrutiny into deal advantage

Roadblocks could emerge, however. Japan’s Ministry of Economy, Trade and Industry (METI), alongside the Financial Services Agency (FSA), have signaled they are looking to clarify what they mean by growing ‘corporate value’ when targets receive multiple buyout proposals at different price points. They have also raised concerns around the sale of assets deemed critical to Japan’s national security or for supply chain resilience.

Can this slow the exuberance? Possibly – but any pause is likely to be temporary. This is because interest in Japan is being driven by structural reform, demographic shifts, and a deep pool of strategic and financial buyers that view M&A as a core growth lever.

Even if regulatory scrutiny tightens, Japan Inc’s fundamentals remain intact. Dealmakers that can navigate valuation shifts, regulatory nuance, and competitive auction dynamics will be best positioned to capture the next wave of opportunities.