16 impact citizens’ survival, daily lives or economic activities. In line with this, the Japanese government has identified specific business sectors linked to these critical products as “core businesses” under FEFTA.” Mr. Kiuchi adds: “Meanwhile, the Japanese government persists in its efforts to promote investment in Japan. Through various guidelines, statements, and legal reforms, it both supports and pressures corporations to strengthen financial benchmarks—such as return on equity (ROE)—enhance corporate governance, ensure fair treatment of shareholders, engage more proactively with investors, and improve transparency and disclosure. Additionally, the government pushes for the unwinding of cross-shareholdings, which are known to weaken management discipline. These policies have facilitated activist shareholders in presenting their arguments and garnering support from institutional and retail investors, further integrating activism into Japan’s corporate environment. The mindset of corporate leaders in Japan has evolved as well. Increasingly, they are open to pursuing hostile takeovers—now more commonly referred to as “unsolicited takeovers” in official contexts—of industry peers. Many are also willing to consider significant restructuring initiatives, including divestitures of core businesses or substantial workforce reductions, even during periods of profitability. For these macroeconomic reasons, M&A activity in Japan remains strong. While fluctuations driven by geopolitical events, currency movements, and other external factors are inevitable, I do not foresee any shift in the long-term trend.” Thorough upfront research on the regulatory environment Mr. Kiuchi adds: “As in any jurisdiction, Japan has regulations that may seem counterintuitive or difficult to navigate. While these are rarely deal-breakers, conducting thorough upfront research on the regulatory environment—aligned with your acquisition goals—is essential to avoid unexpected challenges during negotiations. Many M&A failures stem from a lack of understanding of Japan’s cultural and business practices. Again, it is important to research the industry ecosystem in your chosen field, identifying the expectations of key players—whether you intend to align with traditional norms or disrupt them.” First significant revisions in nearly two decades to its corporate governance and public takeover guidelines Ms. Sakai indicates: “A major shift occurred in August 2023 when Japan’s Ministry of Economy, Trade and Industry (METI) issued the first significant
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