Japan’s ruling Liberal Democratic Party (LDP) have called on the country’s largest pension fund, the Government Pension Investment Fund (GPIF), to increase its investments in domestic private equity and venture capital funds. This initiative aims to strengthen Japan’s private equity investment network and to retain the profits arising from corporate structural reforms domestically rather than letting them flow to foreign investors.
Currently, domestic private equity participation is limited, with the Japan Investment Corporation (JIC), supported by the Japanese government, mostly acting as the sole domestic player in large deals. Meanwhile, global private equity firms like KKR and Bain Capital have successfully operated in Japan, benefiting from corporate governance reforms, shareholder activism, and sector consolidation policies.
LDP member Fumiaki Kobayashi stated, “We often hear that investors like KKR and Bain Capital are helping renew major domestic companies, but the profits generated from such structural reforms are going to pension funds in the US and Canada.”
The group’s proposal emphasizes that GPIF should increase its allocations to domestic private equity and venture capital. Kobayashi also stressed that domestic private equity funds need to participate more actively in large consolidations and acquisitions.
At present, investments in private equity, real estate, and infrastructure account for only 1.6% of GPIF’s total assets of 258.7 trillion yen ($1.82 trillion), which is below the 5% maximum limit. This proposal is part of the broader policy initiated by former Prime Minister Fumio Kishida to expand Japan’s asset management industry to $5 trillion.
Source: Reuters.com