Structure Before Strategy: Japan's Private Markets Model

Japanese institutional investors have been steadily increasing their allocations to private equity, private credit, infrastructure and other private markets strategies. Japan Post Bank's private equity exposure, for example, has grown from negligible levels to over US$50 billion between 2016 and 2025 – a reallocation that would have seemed improbable not long ago.

The macro drivers are familiar. Persistently low yields, the return of inflation, governance reform and the need for diversification have all played their part. More recently, changes in regulatory capital treatment (particularly under updated FSA guidelines) have altered the relative efficiency of certain asset classes, making private credit, in particular, more competitive against traditional holdings such as Japanese government bonds.