Japan’s ruling Liberal Democratic Party is turning its attention to private equity, urging the country’s massive public pension fund, GPIF (Government Pension Investment Fund), to allocate more capital to domestic PE and VC, according to a report by Reuters.
The move is part of a broader effort to strengthen Japan’s local private markets.
A group of lawmakers, led by Fumiaki Kobayashi, presented a formal proposal to Prime Minister Shigeru Ishiba on Wednesday, calling for GPIF to ramp up its alternative investments in a way that supports Japanese dealmakers and retains private market returns within the country.
“We often see global firms like KKR and Bain Capital helping to transform Japanese corporates, but the returns from those restructurings go back to US and Canadian pension funds,” Kobayashi said at a press briefing. “We believe Japan should be capturing more of that value.”
While global private equity players have gained strong traction in Japan — thanks to corporate governance reforms, a rise in shareholder activism, and ongoing industry consolidation efforts — domestic private equity participation in large-cap deals remains relatively low. Often, government-backed Japan Investment Corporation (JIC) stands as the sole Japanese non-strategic bidder in major transactions.
The lawmakers’ push comes amid rising political momentum to boost Japan’s $5tn asset management industry, a cornerstone policy championed by former Prime Minister Fumio Kishida. The proposal suggests that GPIF, with assets totalling JPY258.7tn ($1.82tn), should take a more active role in scaling Japan’s private markets.
Currently, alternative assets — including private equity, infrastructure, and real estate — make up just 1.6% of GPIF’s portfolio, well below its 5% allocation cap. The new proposal recommends expanding that allocation, with a focus on supporting domestic PE and VC firms and encouraging them to participate in large-scale M&A activity.
