Japan’s financial regulator is positioning private credit as a core component of its evolving financial strategy, even as overseas markets face volatility and rising redemption pressure, according to a report by Reuters.
A senior Financial Services Agency official said private credit could become an important funding channel for Japan as demand for corporate finance increases, driven by a rise in mergers and acquisitions and shifting corporate behaviour.
Michinori Haba, deputy director-general for financial markets at the FSA, said Japan’s private credit sector remains underdeveloped but has strong potential for expansion as companies deploy large cash reserves and pursue more aggressive investment strategies amid inflation and policy support for growth-oriented investment.
He noted that, under the government’s upcoming financial strategy, private credit could form one of the pillars of a more diversified capital market, alongside closer oversight of governance and international developments.
Japan’s M&A market has expanded sharply, with deal value more than doubling last year to a record JPY53tn ($351bn), creating stronger demand for leveraged financing and alternative lending solutions such as mezzanine debt, which remains relatively scarce domestically.
While global private credit markets have faced redemption pressures and concerns over credit quality, Japan’s market is still in its early stages and heavily reliant on traditional bank lending.
However, early signs of development are emerging, including discussions among major financial institutions such as Sumitomo Mitsui Financial Group and Nippon Life Insurance to establish private credit funds targeting leveraged buyouts.
