In brief: Market and policy climate for financial services M&A activity in Japan #JapanFinance

Market and policy climate

Market climate

How would you describe the current market climate for M&A activity in the financial services sector in your jurisdiction?

As in previous years, one of the key areas in the financial services sector where we are seeing renewed activity is fintech, where many businesses and technologies are rapidly evolving. For example, in 2024, Gaitame.Com Co, Ltd made a tender offer to Money Partners Co, Ltd for around US$95 million.

In the current market, large financial sector companies are actively engaging in M&A. One of the key drivers of this trend is addressing the well-documented declining population of Japan, aiming to increase their share of the company in Japan and seeking new growth opportunities out of Japan. There were some notable transactions during 2024. For example, Mizuho Financial Group invested in Rakuten Card Co, Ltd for about US$1.1 billion in Japan, and the acquisition of Resolution Life Group Holdings for US$82 billion by Nippon Life Insurance.

Thus, there is a significant amount of M&A activity taking place in Japan’s financial services sector.

Government policy

How would you describe the general government policy towards regulating M&A activity in the financial services sector? How has this policy been implemented in practice?

Existing government policies regulating M&A activity in the financial services sector continue to appear generally neutral. For example, the approval of M&A transactions will generally proceed smoothly as long as the relevant transaction does not threaten the stability of the Japanese financial system. Furthermore, the nationality of the purchaser will generally not affect the participants from obtaining any necessary licences or permits required.

However, the Financial Services Agency (FSA) is aware that there are certain number of cases where foreign business operators or investors purchase shareholdings of existing Japanese licensed financial institutions, in order to avoid being subject to the relevant licensing requirements. This is theoretically possible because, for certain types of licences, such as securities companies, cryptoasset exchanges or fund transfer service providers, only a post facto notification is required when a major shareholder has changed. In response to these circumstances, the FSA recently amended its supervisory guidelines and stated that, if there is a significant change in the shareholder structure of such financial institutions and a significant change in the composition of the officers or important employees of the financial institution initiated by the change of shareholder, the FSA will verify, in the same way as for registration examinations, whether the financial institution is still able to appropriately carry out the licensed business.