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Japan’s M&A market expanded significantly in 2025, with both transaction volume and aggregate deal value reaching record highs. According to Japanese information site Recofdata, the total number of M&A transactions involving Japanese companies increased by 8.8% year on year to 5,115 deals, while aggregate deal value rose by 74.7% from about JPY20.5 trillion (USD125.28 billion) in 2024 to JPY35.7 trillion, surpassing the previous peak recorded in 2018. The increase in deal value was driven primarily by several large cross-border transactions.

Domestic transactions remained the largest component of the market by volume, exceeding 4,000 deals, as Japanese companies continued to streamline business portfolios, divest non-core assets, and improve capital efficiency. Cross-border M&A also remained active.

Although the number of outbound transactions declined slightly, their aggregate value increased by 87.2% to about JPY18.2 trillion. Inbound M&A likewise reached record levels in both transaction volume and value, demonstrating continued foreign investor interest in Japanese companies.

North American deals reshape Japan M&A

North America accounted for about two-thirds of outbound deal value. Japanese companies continued to pursue overseas growth, particularly in the technology, digital infrastructure, insurance, and financial services sectors, with several of the year’s largest transactions involving US targets.

The market also continued to reflect the growing influence of the Ministry of Economy, Trade and Industry (METI) Guidelines for Corporate Takeovers, issued in 2023. Unsolicited tender offers increased from four in 2024 to seven in 2025.

Most notably, Taiwan-based YAGEO successfully completed its tender offer for Shibaura Electronics following a competitive bidding process, illustrating the increasing acceptance of unsolicited bids and the growing emphasis on shareholder value and procedural fairness.

Activist investors remained active throughout the year, particularly among Prime Market-listed companies. At the same time, management buyouts and going-private transactions continued to increase, supported by robust private equity activity. A notable example was EQT’s announcement of a USD2.7 billion tender offer for Fujitec following prolonged governance disputes.

METI takeover guidelines shape M&A

Guidelines for takeovers in 2023. In August 2023, the METI published the above-mentioned guidelines to establish fair practices and best standards for M&A transactions, promoting sound corporate acquisitions in Japan.

The guidelines articulate a code of conduct for directors and boards of target companies receiving acquisition proposals. Principally, on receipt of a proposal to acquire corporate control, management or directors are expected to promptly submit or report the proposal to the board.

When the board receives a “bona fide offer” defined as a specific, purposeful and feasible acquisition proposal, it is obliged to give such an offer “sincere consideration”. Should the board resolve to pursue an agreement, it must assess the acquisition’s appropriateness from the standpoint of enhancing corporate value and make reasonable efforts to ensure that the terms of the transaction secure shareholders’ interests.

To enhance transparency, the guidelines emphasise that acquirers should provide shareholders with sufficient information, including the purpose of the acquisition, a summary of the acquiring party, and post-acquisition management strategy, and allow sufficient time for informed decision making. Target companies are likewise expected to furnish shareholders with all material information relevant to evaluating the transaction.

The guidelines also address takeover response policies and countermeasures, underscoring the importance of respecting shareholder intent, ensuring necessity and proportionality, prior disclosure, and maintaining dialogue with the capital markets. Consistent with prevailing judicial precedents, the guidelines stress that the invocation of countermeasures based on the takeover response policy should rely on the rational intent of shareholders, since it concerns the corporate control of the company.

Although the guidelines are characterised as “soft law”, setting out principles and best practices rather than binding rules, they are rapidly becoming an integral part of the regulatory framework governing public M&A in Japan. Accordingly, market participants are well advised to remain cognisant of the guidelines when engaging in public company acquisitions.

METI clarifies takeover guidelines 2026

Measures for promoting better understanding of the guidelines in 2026. On 4 February 2026, the METI reconvened the Study Group on Fair Acquisition Practices to consider measures for promoting a better understanding of, and potential updates to, the guidelines. On 18 June 2026, the METI published for public comment draft interpretive materials, including draft interpretations, key points and Q&A, with the comment period closing on 17 July 2026.

While maintaining the existing framework of the guidelines, the draft materials are intended to clarify their interpretation and facilitate consistent practical application. Among other things, the draft Q&A emphasises that a takeover proposal should not be assessed solely on the offered price, as there may be exceptional cases where the offer price does not adequately reflect the target company’s post-acquisition corporate value.

It also explains, through illustrative examples, that economic security considerations may be relevant to corporate value where they affect the target company’s future cash flows or discount rate. At the same time, the draft cautions against relying on vague qualitative factors or invoking “corporate value” merely to justify management entrenchment.

It will be important to monitor how these materials are finalised following the public consultation, and how they influence market practice, including boards’ and special committees’ evaluation of takeover proposals and their communication with shareholders.

Japan tightens tender offer rules

Amendments to tender offer regulations. On 15 May 2024, the National Diet (legislature) enacted significant amendments to the Financial Instruments and Exchange Act (FIEA), introducing substantial changes to both the tender offer regime and large shareholding reporting requirements.

On 4 July 2025, the Financial Services Agency of Japan (FSA) promulgated the amended Cabinet Order and amended Cabinet Office Ordinances (amended government ordinances) in order to specify how the amendments to the FIEA apply in practice.

The 2024 amendments, together with the amended government ordinances, are expected to have a substantial impact on M&A practices in Japan. The amended rules came into effect on 1 May 2026.

The amendments have lowered the threshold for mandatory tender offers from one-third to 30%. The previous one-third threshold corresponded to the level at which a shareholder can veto special resolutions (which require a two-thirds majority).

The shift to a 30% threshold aligns with international standards and reflects actual voting practices in Japanese listed companies, where a 30% stake is generally sufficient to block special resolutions and can significantly influence ordinary resolutions (which require a simple majority).

Under the previous regime, on-market transactions are exempt from mandatory tender offer requirements. However, there have been instances where substantial shareholdings have been rapidly accumulated through on-market purchases. In response to calls for greater transparency, the amendments have brought on-market transactions within the scope of the tender offer regulations, enhancing market fairness and transparency.

Japan updates large shareholding reporting

Amendments to large shareholding reporting regulations. Under the FIEA, any person whose shareholding in a listed company exceeds 5% is generally required to file a large shareholding report within five business days. Certain financial institutions may instead use a special reporting system, under which reports are filed only twice monthly.

However, this system is unavailable where the institution is involved in “material proposals” concerning the investee’s business activities. To facilitate greater engagement between institutional investors and investee companies, the definition of “material proposals” has been clarified through amended government ordinances and the FSA’s Q&A.

Certain proposals, including proposals relating to the appointment or removal of directors and the disposal of the company’s principal business, are generally treated as “material proposals”. Where a reporting person intends to make such a proposal, its contents must be disclosed with sufficient specificity in the large shareholding report.

In addition, new disclosure requirements apply in certain circumstances where a reporting person has decided or plans to acquire shares that would result in a holding of 5% or more. These amendments are intended to enhance transparency regarding both significant shareholder proposals and substantial share acquisitions.

The amendments also provide that institutional investors will generally not be treated as “joint holders” solely because they agree, on a resolution-by-resolution basis at a particular shareholders’ meeting, how each will exercise its own voting rights or other specified shareholder rights, provided that the purpose of the agreement is not to jointly make a “material proposal”.

As a result, their shareholdings need not be aggregated for the purposes of calculating shareholding ratios under the large shareholding reporting regime. These changes are intended to facilitate collaborative engagement among institutional investors while maintaining appropriate transparency.

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