According to estimates by Japan’s Ministry of Economy, Trade and Industry, between 600,000 and 800,000 Japanese small and medium-sized enterprises (SMEs) will face succession issues by 2035. These businesses account for 70 percent of Japan’s employment and serve as the backbone of the economy. The traditional model of family succession has broken down, as young people are reluctant to return to their hometowns to take over family businesses, making mergers and acquisitions (M&A) the only viable option.

The Japanese government is vigorously promoting “third-party succession” by reducing cultural and institutional barriers to business sales through tax incentives and official matching platforms. This means that over the next decade, the Japanese market will see a steady supply of high-quality acquisition targets—most of which are profitable and technologically sound. For overseas strategic buyers and private equity firms, this represents a structural deal flow pipeline independent of economic cycles, particularly for investors in sectors such as high-end manufacturing, healthcare, and regional services.