Private equity investment has been a mainstay of the American economy since the end of World War II. The junkbond boom of the 1980s and the dot-com bubble of the late 1990s fuelled an industry that is often characterised by the media as ruthless and predatory. American PE firms are well capitalised and regularly execute transactions in the tens of billions of dollars. The PE industry in Japan, in contrast, is still in its infancy. Its first dedicated fund was formed in 1997.
Today, industry activity continues to trail behind that found in other economies in terms of transaction size, volume and fundraising benchmarks. According to an article written by Kosaku Narioka, published in the The WSJ on November 10, 2014, Japan has raised only ¥630 billion ($5.3 billion), or 1% of the world’s total PE market, despite being the world’s third-largest economy. This low level of investment activity is rooted in managers’ unwillingness to execute mergers and acquisitions due to a risk-averse culture and negative perceptions of PE. However, recent demographic shifts and international competition are forcing managers to reconsider their strategies, opening the door for infusions of private equity capital and management expertise. Culturally, the Japanese identify money as spiritually unclean, a precept that originates from the Edo period from 1603 to 1868.
From: A Nation Apart: The Development of Private Equity in Japan