The Light from the East

Carlyle

Research

11 Pages

Carlyle explains why Japan’s combination of strong operating earnings yields, very low financing costs, and corporate reform creates a distinctive opportunity set. The discussion links yen dynamics, cash rich balance sheets, and policy pressure on return on equity to a more active market for corporate control. Rising activism, delistings, and portfolio restructuring are presented as catalysts for both productivity gains and transaction growth.

Date published: July 2023

Figure 9. Source: Carlyle analysis of Bloomberg data of S&P Broad Market Indices, May 5, 2023. There is no guarantee any trends will continue.

Key Takeaways

Cash rich corporate sector: Japanese companies generate ample cash, borrow cheaply, and still leave significant room to lift profitability.
Reforms and activism: Governance changes, higher return targets, and activist investors push firms to sell non core assets and simplify structures.
Growing deal pipeline: Spinoffs, take private transactions, and asset sales are likely to expand as management seeks aligned long term partners.

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