Japan’s H1 2025 M&A Hits Two-Decade High: PE, Governance & Seven & i Moves

The first half of 2025 marked a watershed for Japanese and Asia-Pacific M&A. According to data from LSEG, Japanese deals totaled a record US$232 billion—more than three times the value from H1 2024—while overall Asia M&A volume rose to US$650 billion, more than doubling year-on-year. Such a surge reflects a confluence of structural and strategic factors.

Domestically, companies are reacting to long-standing pressure to address low valuations, deeply embedded cross-shareholdings, and inactive boards. The government’s push for better corporate governance has catalyzed take-private deals, activist drives, and the privatization of listed subsidiaries. Examples include Toyota’s US$34.6 billion take-private of its component business, and NTT’s US$16.5 billion transaction. Low interest rates have eased financing costs, supporting both leveraged and strategic transactions. Together, these dynamics have made Japanese assets more attractive both at home and to foreign suitors.

Private equity and outbound investment are also central. PE-firms such as Bain, EQT, Advent, and KKR are competing for deals—most visibly in the interest in Trend Micro (market cap ~¥1.32 trillion / ~US$8.5 billion), which is being considered for take-private. Retailing is seeing active carve-outs: Seven & i’s sale of York Holdings to Bain (around ¥814.7 billion / US$5.4–5.5 billion) confirms both appetite from PE and willingness of large Japanese conglomerates to divest non-core business.

Yet, despite strong momentum, there are mounting risks. Firms report growing dissonance between buyer and seller valuations, especially under uncertain global economic outlooks. Tariff and trade policy risks, geopolitical instability, and inflation volatility complicate forecasting, due diligence, and capital allocation. These frictions have already caused several proposed deals to stall or fall through.

Strategically, these developments suggest an inflection point for Japan: a shift toward more dynamic capital markets, higher responsiveness to governance, and increased importance of private equity. For foreign and domestic investors, Japan is no longer a passive surplus-capital economy but a fertile ground for active repositioning. Key open questions include how effectively these reforms will reform entrenched governance practices, whether interest rate rises will dampen borrowing-driven deals, and how inbound investment scrutiny will affect cross-border deal flow.