Back in 2012, I wrote a blog post calling for more private equity in Japan. Japanese companies are held back by a hidebound, inefficient workplace culture. Managers are often gray elder statesmen promoted up through the ranks, instead of dynamic outsiders ready to shake things up. Shareholders are often passive owners, doing little to push companies to raise profitability, while managers build empires instead of focusing on what their companies do best.
Private equity has the potential to shake up this cozy, stagnant corporate world, and in the process help revive Japan from its long productivity slump. But several things get in the way. First, hostile takeovers are very difficult, because Japan's corporate boards are mostly occupied by managers, and Japan's courts are unfriendly to takeovers. Second, the government regularly steps in and bails out failing companies, essentially muscling aside private equity. These forces have blocked private equity from contributing to a much-needed overhaul of Japanese business practices.
But in the last few years, this situation has begun to change. During my recent trip to Tokyo, friends in the finance industry were gushing over a sudden "explosion" in private-equity deals. It's possible the dam has broken at last.