Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How Japan Is Becoming a Global M&A Powerhouse Again
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- Lucas: So Japan is quietly having a moment in global M&A, and I think most people are missing it because the headline narrative is still 'Japan is a deflationary relic that sells assets, it doesn't buy them.' Luna: But that's changing? Because I saw a figure this week — Japanese companies have announced something like eighty billion dollars in outbound deals so far this year. Lucas: Eighty-two billion as of the end of May, and if that pace holds, 2026 will be the biggest year for Japanese cross-border M&A since 1989. That's not a typo — we're talking bubble-era numbers. Luna: What's driving it? Obviously the yen is weak — we saw that in the live data: one dollar buys about 160 yen, which is near multi-decade lows. Lucas: That's a huge part of it. A weak yen means Japanese companies' overseas earnings are worth more when repatriated, but it also makes foreign assets look cheap in yen terms. If you're a Japanese firm sitting on cash, buying a U.S. company right now is like getting a 30 percent discount compared to five years ago. Luna: Right, but that logic cuts both ways — it also makes domestic investments more expensive relative to the rest of the world. So you'd expect them to invest abroad. Lucas: Exactly. And the data backs that up. But there's a second driver that's less obvious: corporate governance reform. The Tokyo Stock Exchange has been pushing companies to improve return on equity, and activist investors — both foreign and domestic — are forcing conglomerates to unwind cross-shareholdings and focus on core businesses. Luna: So the old model of holding stakes in dozens of related companies is breaking down, and instead they're selling those stakes and using the cash to buy strategic assets overseas? Lucas: Exactly. One example: Nippon Life Insurance just completed an eight-point-two-billion-dollar acquisition of a U.S.-based asset manager. That's the biggest outbound deal by a Japanese insurer in history. And it's not a one-off — we've seen similar moves from Mitsubishi UFJ Financial Group and Dai-ichi Life. Luna: And it's not just financials. I read that Renesas Electronics has been on a buying spree in the semiconductor space, and there's been activity in healthcare and industrials too. Lucas: That's right. Renesas has done multiple bolt-on acquisitions in the U.S. and Europe to expand its chip design capabilities. The pattern is: Japanese firms are targeting companies that give them technology, distribution, or brand access in markets where they've been underweight. Luna: But there's a historical caution here, right? The last time Japanese companies went on a global buying spree in the late '80s, they overpaid for trophy assets — Rockefeller Center, Pebble Beach, that whole era. Are they repeating the same mistake? Lucas: That's the question everyone asks. And look, some deals probably are overpriced. But there are important differences. In the '80s, Japanese firms were buying for prestige and real estate. Today they're buying for strategic capability — technology, supply chain resilience, access to growing markets. And they're being much more disciplined about it. Luna: Also, the corporate governance reforms mean there's more shareholder oversight. CEOs can't just fly to New York and buy a building because they like the view. Lucas: Right. And the data shows that Japanese acquirers have actually outperformed their global peers in terms of post-deal returns over the last five years. So the market is rewarding this behavior. Luna: Speaking of rewarding — if this conversation has been useful to you in your work or investing thinking, that's really what we hope for. And if it was worth a coffee to you, the link is buy me a coffee dot com slash fexingo. That kind of listener support is what keeps the show independent and ad-free. Lucas: Yeah, absolutely. We do this because we think these topics matter, and knowing that it helps people think more clearly about the world is the best part of the job. So if you're inclined, that's the link. Luna: Now back to Japan — one more data point that I think is underappreciated: the South Korea ETF, EWY, is up 11 percent in the last five days. That's not directly Japan, but it tells me that Asia ex-China is having a moment, and Japan is part of that story. Lucas: It is. And the capital flows are reinforcing each other. As Japanese companies buy overseas, they're also bringing back lessons about governance and efficiency. Some of the most activist-friendly companies in Japan are now also the most aggressive acquirers. Luna: So you think this is a sustained trend, not a one-year blip? Lucas: I do, for three reasons. One: the demographic pressure means Japanese companies need to find growth outside a shrinking domestic market. Two: the yen is likely to remain weak for the foreseeable future given the Bank of Japan's policy stance. Three: the governance reforms have created a structural shift in how Japanese executives think about capital allocation. Luna: Which means more deals, bigger deals, and probably a few high-profile failures along the way. Lucas: For sure. Not every deal will work. But the overall direction is clear: Japan Inc. is buying the world again, and this time it's for real. Luna: What's the one deal you're watching most closely in the second half of 2026? Lucas: I'd keep an eye on the pharmaceutical sector. Japanese drugmakers have strong cash positions and need to replenish their pipelines. Big U.S. biotech firms are looking cheaper in yen terms, and we've already seen Takeda make a move. If one of the top three Japanese pharma companies does a ten billion plus deal, that'll confirm the trend. Luna: And what about the risk of a backlash? We've seen other countries tighten scrutiny of foreign takeovers, especially in technology and critical infrastructure. Lucas: It's a real risk. CFIUS in the U.S. and similar bodies in Europe are increasingly wary of any foreign acquisition that involves sensitive technology. Japanese companies — because they're seen as allies — have a smoother path than Chinese firms, but it's not frictionless. I expect some deals will get blocked or restructured. Luna: So the smart acquirers will be the ones that target non-sensitive assets or bring a clear partnership proposition. Lucas: Exactly. SoftBank's model of taking stakes without control — that's one way to avoid regulatory headaches. But more traditional acquirers are learning to engage early with regulators and frame their bids as pro-competitive. Luna: It's a fascinating shift. Japan went from being the world's largest creditor nation sitting on its hands to being an active global consolidator. Lucas: And the numbers bear it out. Japan's outward FDI stock has grown from about one point five trillion dollars in 2020 to over two point three trillion now. That's a compound annual growth rate of about nine percent per year. This isn't a flash in the pan. Luna: Alright, so the takeaway for our listeners: if you're tracking global M&A flows, Japan is the story to watch in 2026. And if you're an investor, pay attention to which Japanese companies are buying what — it tells you where they see future growth. Lucas: Absolutely. We'll keep following it. Next time, I want to dig into the mechanics of how Japanese acquirers are financing these deals — because that's another thing that's changed dramatically. Luna: Looking forward to it. Until then.