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The head of one of Japan’s largest associations of company leaders said the country had reached a “big tipping point” in corporate reform as a critical mass of shareholder activists pressed for companies waking up from decades of slumber.

The comments by Takeshi Niinami, president of Japanese drinks group Suntory and chair of the influential Japan Association of Corporate Executives, come at the end of a year in which a record number of foreign and local activist funds bought a record number of stocks listed in Tokyo. .

Activist funds, such as Elliott Management and ValueAct, have also become bolder in their choice of targets – a list that now includes Japan’s largest property developer, Mitsui Fudosan, and the automaker Nissan.

Under pressure from activist investors, the past year has also seen a sharp increase in the value of unsolicited takeover bids – a tactic that was once considered taboo, but is now endorsed by the government through to changing integration patterns.

In an interview with the Financial Times, Niinami said that the influx of activism and its impact on Japan’s chief executives, marking the end of decades of stagnation, deflation and corporate inertia in the country.

“The lost 30 years have ended, and we are facing a good tipping point. That should be positive,” said Niinami, who predicted that activism, making deals through private equity and domestic consolidation will continue to increase in 2025.

“This is a tipping point for Japan to become more effective, more productive and more profitable,” said Niinami, who added that Japan’s management is now obliged to pay more attention to the criteria that investors care about the most, such as the cost of capital. and return on equity.

The race is on, Niinami said, for chief executives to change their companies before an activist tells them to do so. the unsolicited bid for Seven & i Canada’s Alimentation Couche-Tard lined the stakes, he said.

“This message is very important to push all CEOs to think what is wrong with my company? If there is something wrong, we have to fix it, otherwise there will be a lot of warning from activists. Sleeping companies will wake up ,” said Niinami.

In addition to ACT’s $38bn unsolicited bid for Japan’s largest convenience store operator, the 2024 deals include Nidec’s attempted $1.6bn “unsolicited acquisition” of Makino Milling and a tug of war between private equity giants KKR and Bain over IT services group Fuji Soft.

Nicholas Smith, Japan strategist at CLSA Securities, said Japan is now the world’s second largest market for private equity and for activism. Japan accounts for two-thirds of activist activities in Asia, he said, and counting.

“All over the world, investors and businessmen are looking closely at the Seven&i trade as a potential watershed for Japan’s rapid evolution into a market for corporate control,” said said Smith.

But the transformation of Japan’s stock market, warned investment bankers and other deal advisers, should be seen as a fragile process. Jeremy White, an M&A partner at the law firm Morrison Foerster in Tokyo, said the number of confrontations with shareholders or unsolicited bid stories could still fall by 2025.

“I think that will signal that there is enough friction in the market to stop what the direction of travel looks like. I think what we have now is a velocity that is going in a certain direction: that should not go back and forth , just applying the brakes is not good,” White said.