Hedge funds and asset managers are increasingly turning to Japanese startups, attracted by some eye-popping past returns in the long-overlooked sector.

Asian hedge fund firms including Pleiad Investment Advisors and global investment giants like T. Rowe Price Group Inc. and Baillie Gifford are providing late-stage growth capital to the nation’s most promising ventures, according to fund managers at the companies.

They’re emboldened by surging share prices of startups that went public in recent years, along with renewed government efforts to promote digitalization and entrepreneurship. With just six unicorns, the world’s third-largest economy has struggled to produce new companies that have global ambitions like Alibaba Group Holding Ltd. and Tesla Inc.