Private markets

14 September 2026, 00:00 UTC Chief Investment Office GWM Investment Research

Japan PE: Turning reform into returns Private markets Authors: Karim Cherif, Head Alternative Investments, UBS Switzerland AG; Richard Huang, CAIA, Private Market Strategist, UBS AG Hong Kong Branch; Antoinette Zuidweg, Alternative Investments Strategist, UBS Switzerland AG

• Governance reform, corporate carve-outs, and aging- owner succession needs are creating a durable transaction pipeline in a still-underpenetrated market.

• The best strategy is, in our view, two-pronged: fix the old and build the new. Legacy assets offer self- help potential, while select advanced manufacturing, health care, and tech businesses can compound earnings.

• Execution will matter more from here. Rising competition, rates, and currency volatility increase the premium on proprietary sourcing, conservative leverage, local operating capability and disciplined manager selection.

From niche market to global hunting ground Figure 1: Japan PE has moved from niche to scale Attractive entry multiples, low financing costs, and a weak Japan PE Deal Value and Deal Count yen have propelled Japan into the private equity spotlight. Deal activity reached USD 49 billion in the 12 months ended June 2026, according to PitchBook. Yet the opportunity extends beyond cyclical cheapness: governance reform, corporate restructuring, and demographic succession needs are creating a durable pipeline of transactions as nominal growth returns. (See Fig. 1)

The return of nominal growth broadens the operating backdrop for portfolio companies and reinforces the shift from a valuation-led opportunity toward an execution-led transformation story. (See Fig. 2)

Source: PitchBook, UBS September 2026

This report has been prepared by UBS Switzerland AG, UBS AG Hong Kong Branch. Please see important disclaimers and disclosures at the end of the document.

Figure 2: Nominal growth strengthens the Succession needs are expanding the lower-middle- operating backdrop market opportunity Japan Nominal GDP (trailing 12-months, seasonally adjusted, JPY The Small and Medium Enterprise Agency estimated that trillion) by 2025, roughly 2.5 million Japanese small and medium- sized enterprise (SME) owners surpassed the age of 70, and that approximately half had not identified a successor. This creates a growing need for external capital, professional management, and orderly ownership transitions.

Together, these forces have supported attractive outcomes. According to Preqin, Japan-focused private equity has outperformed the Topix over the 10 years to 2024, generating a net internal rate of return of 14.8%, compared with a 9.5% total return for the index. Although these historical results reinforce the opportunity, they also underscore the importance of manager selection as competition intensifies. (See Fig. 4) Source: IMF, UBS September 2026

Governance reform is creating a structural pipeline of Figure 4: Japan PE has outperformed public transactions markets Horizon net IRRs: Japan-focused private equity vs TOPIX total return The Tokyo Stock Exchange’s March 2023 initiative asked listed companies trading below book value to assess their cost of capital and disclose plans to improve capital efficiency. The resulting pressure to raise returns on invested capital is encouraging portfolio simplification, non-core divestitures, take-privates, and more open M&A (mergers and acquisitions) processes. In effect, long- standing balance-sheet inefficiencies are being converted into actionable transactions, reflected in the steady rise in take-private and carve-out activity. (See Fig. 3)

Figure 3: Corporate reform is converting inefficiency into deal flow Japan take-private and carve-out deal value and count Note: as of December 2024, includes close-ended Japan-focused PE funds of vintages 1997-2024 that have been closed or liquidated (excl. VC); Source: JPX Market Innovation & Research and Preqin-JPEA Benchmark Survey, UBS September 2026

Rapid growth, substantial runway Despite several years of rapid growth, Japan’s private equity assets under management—including venture capital —remained modest at roughly USD 200 billion as of March 2025…