Perspectives
15 June 2026
Following several decades of rapid catch-up growth, in the 1990s the Japanese economy entered a period of economic stagnation, as the previous asset boom turned to bust, and working age population began to decline. In nominal terms, GDP failed to grow for nearly two decades, with the Nikkei 225 still around 75 per cent below its 1989 peak in late 2012.
In early 2013, the Japanese government launched a series of reforms designed to address these challenges. The ‘Three Arrows’ included:1
The 2013 reforms marked a significant turning point, with inflation turning positive and nominal GDP growth resuming. Along with more recent labour market, corporate governance, financial, legal and national security reforms, this has helped open-up significant investment opportunities in the country – including to overseas investors.
Source: Japan Cabinet Office and Bloomberg
*Macquarie adjustment for tax effects. Source: Statistics Bureau of Japan
“By placing a stronger focus on transparency, capital efficiency and risk management, the corporate reforms of the past decade have changed how Japanese companies think about capital discipline and risk,” says Takuji Watanabe, Macquarie’s Country Lead for Japan and the Head of its Commodities and Global Markets division in the country.
Market volatility has also become much more widely understood in Japan, changing how companies here invest.
“Against a backdrop of higher energy prices, yen depreciation and geopolitical uncertainty in recent years, risk management has become an increasingly important priority for the Japanese government and corporates,” adds Watanabe. “The change in mindset is broader than many foreign investors realise and presents opportunities in a number of areas.”
That mindset shift has created real value for shareholders and driven up returns and equity valuations, in turn attracting global capital. Foreign investment in Japanese companies has increased ten-fold since the late 1990s,2 and global investors are acquiring Japanese companies at a record pace.3
While the wave of takeovers has been led by some of the world’s largest private equity firms and global asset managers, which have expanded their Tokyo teams in recent years, Japanese companies are leading the way.
“Some of Japan’s largest trading companies have demonstrated how much value can be created when capital is allocated deliberately and capital investment is shaped with shareholder returns in mind,” says Watanabe. "As part of that, we're also seeing companies place greater emphasis on managing risks around foreign exchange and interest rates, where effective risk management is increasingly viewed as an enabler of long-term growth."
Alongside more attractive corporate valuations, investment is being driven by the need to address structural trends such as the country’s new strategic energy plan, labour scarcity from a shrinking and rapidly aging population, and the accelerating pace of digital transformation. Japan is also attracting significant investment into sectors such as semiconductors, AI, and data centres as companies position for the next phase of economic growth.
Energy has long been one of Japan’s most consequential economic issues. Its heavy reliance on imported coal and natural gas for its energy needs4 has left it vulnerable in the face of geopolitical events in recent years.
Electricity demand in Japan is shifting from a long-term decline to a period of growth, projected to rise 5.3 per cent over the next decade, driven in large part by an 18.3 per cent increase in industrial demand amid the expansion of data centres, semiconductor manufacturing and industrial electrification.5
Data centre power consumption alone could more than triple from 19 TWh in 2024 to as much as 66 TWh by 2034, consuming as much power as 15-18 million Japanese households within a decade.6
The 7th Strategic Energy Plan, approved in 2025, outlines the country’s approach to meeting this growing demand while achieving carbon neutrality, greater energy security and ensuring economic competitiveness. It aims to make renewables Japan’s primary power source (40-50 per cent of the electricity mix), alongside an increased reliance on nuclear (increasing from 7 to 20 per cent) and a reduced but increasingly decarbonised share of thermal power.7
Source: Ministry of Economy, Trade and Industry (METI)
“As the share of renewables will continue to grow, to deliver on energy security, competitiveness, and climate imperatives together, dispatchable and flexible capacity including gas, hydropower, nuclear and batteries will become increasingly essential to energy system stability,” says Yoshikazu Arimizu, Head of Power Structuring for Japan in Commodities and Global Markets.
The government’s flagship Green Transformation strategy aims to transition the country’s energy sector through ¥150 trillion (~$US1trillion) of public-private investment over the coming decade. Alongside decarbonising power supplies and manufacturing processes, including through expanding the use of clean energy, and increasing the energy efficiency of buildings, capital will support the development of grid infrastructure to enable the co-location of data centres and clean energy sources.8
Battery Energy Storage Systems (BESS) is one area being expanded to enable a greater level of renewable energy to be incorporated into the country’s electricity mix (and support the growth of data centre capacity).9 Since December 2023, at least $US2.6 billion in Japanese battery storage projects have been announced.10
Macquarie Asset Management (MAM)-backed Eku Energy has 5.3 GWh of battery capacity currently in operation or under development across over 18 projects in Japan,11 including:
The Hirohara Energy Storage Plant is Eku Energy's first project in Japan.
By improving grid flexibility, BESS projects can help manage the high power demands of data centres, accelerating their grid connection and ensuring electricity affordability15 – giving data centre investors greater certainty.
“Recent volatility in global energy markets has reshaped the fundamentals for our clients. Energy costs and energy security are now closer to the centre of investment decisions,” says Yoshikazu Arimizu, Head of Power Structuring for Japan in Commodities and Global Markets.
“The growing demand for digital and AI in Japan is large enough to justify a long-term investment in the sector, but proposals that balance energy security, affordability and decarbonisation are key to unlocking that,” says Arimizu.
Greater desire to manage energy price volatility has seen the growth of wholesale power procurement in Japan’s electricity market, as it has matured, with risk management solutions like futures and option contracts increasingly used by large organisations to hedge risk.
“Ten years ago, there was limited ability for corporates to hedge wholesale power prices due to lower market liquidity and the dominance of regional utility pricing structures,” says Arimizu. “Since then, market liberalisation and the expansion of wholesale trading and financial risk management instruments have enabled companies to better manage electricity price volatility through longer term, customised hedging strategies.”
Since entering the Japanese market in 2019, Macquarie has grown into a leading structured solutions provider in the local electricity market. As one of the few international firms with a futures clearing sales team presence in Tokyo, Macquarie combines deep local market engagement with global expertise to provide tailored risk management solutions that support clients in managing price risk and uncertainty around future energy costs.
“Access to reliable and affordable energy is a driver of investment, providing the stability and lower operational costs necessary for businesses to grow, innovate, and commit capital to long-term investment decisions,” adds Arimizu.
With around 43 per cent of Japan’s population now aged 55 or older, the working-age cohort is carrying the weight of social insurance and pension obligations for an older age cohort. This demographic pressure is driving new investment in digital and AI to help productivity keep up.
Source: United Nations
Already a leader in robot production and industrial use, Japan’s government is pushing for their accelerated integration into society to combat severe labour shortages in areas as diverse as logistics and long-term care.16
Supporting greater automation and the expanded use of AI across the economy requires, however, strengthening the country’s digital backbone through investment in modern, reliable digital infrastructure that can facilitate significantly increased volumes of data securely, at high-speed, and with ultra-low latency.
Source: Bloomberg; Fuji Keizai Co., Ltd.
Note: Figures for 2024 and onwards are based on projections
In 2024, MAM led a consortium of global infrastructure investors in a deal with Japanese mobile network operator Rakuten Mobile, structured as a strategic sale-and-leaseback arrangement involving a portion of Rakuten’s network assets.
The arrangement freed up capital to fund Rakuten Mobile’s ongoing network investment – critical at a time when communities around the world were using, creating, moving and storing more data than ever before. It was an example of how MAM has been bringing together capital and expertise to build digital infrastructure businesses around the world for over two decades.
“Here in Japan, we’re seeing growing opportunities for investors to participate in high-quality infrastructure platforms across sectors supported by strong long-term fundamentals,” says Toru Inoue, Head of Japan Infrastructure and Private Equity in Macquarie Asset Management.
The transaction, which was executed via a consortium led by the Macquarie Asia-Pacific Infrastructure Fund 3 (MAIF3), helped Rakuten raise over Y170 billion ($US1.2 billion) in funding, and expand its investor base while maintaining operational control of critical digital infrastructure.17
“What differentiates Japanese companies from other countries? Deployment first,” says Hiroshi Yamashina, Senior Analyst in Macquarie Capital. “Technology investment in robotics as well as IT systems and infrastructure is being driven by the need for automated solutions to offset labour scarcity.”
That pressure is driving innovation beyond traditional automation to whole-process redesign across factories, logistics, healthcare and transport.
The investment logic is also being strengthened by the need to replace and modernise an ageing base of installed capital – including legacy infrastructure and industrial assets across sectors such as power, transport, and manufacturing – and by greater pressure on boards and management teams to improve return on invested capital.
Many Japanese multinational technology companies are already leveraging their expertise and existing product and service offerings to support businesses in capitalising on AI and automation technologies:
A new government standard for AI security and data sovereignty has also encouraged hyperscalers to build data centres physically inside Japan, contributing to more than $US28 billion in collective capital being pledged to develop them and 49 data centres already in the pipeline.24
Japan’s next phase of growth is being driven by more than any single reform or investment theme. Governance change, energy system investment, technology and the nation’s underlying demographics are beginning to reinforce one another, creating a broader reset in how capital is being allocated across the country.
That reset is becoming evident in the way boards are assessing returns, in the urgency of investment in technology and power infrastructure, and in the growing pressure on businesses to overcome shortages of labour and skills through automation and AI.
These links can be missed when each theme is assessed in isolation. Looked at together, they show a market undergoing a reset in how capital is allocated, with broader and more dynamic opportunities for global capital than recent history suggests.
Since Macquarie opened its office in Tokyo in 2004, our on-the-ground team has built deep experience across capital and energy markets, and infrastructure and real assets, enabling us to support both local and international clients across these sectors in Japan.
As the country’s structural evolution gains momentum, investor and corporate interest has increased and shifted from broad exposure to more specific areas of deployment in line with global trends. These include:
Businesses that respond to the global changes reshaping one of the world’s most important economies and can navigate the local nuances of its corporate environment are best placed to make an impact as Japan undergoes significant transformation.
