The number of initial public offerings (IPOs) in Japan during the first half of this year fell to its lowest level in 15 years. While the Japanese stock market has continued its strong run, with the Nikkei 225 index jumping more than 30% on the back of an artificial intelligence (AI) investment boom, a shortage of AI startups capable of going public in the short term, combined with strict listing regulations, has led to forecasts that the IPO market slump will continue for some time.
An analysis by the Financial Times (FT) of data from financial information provider Dealogic on Sunday found that Japan recorded just 18 IPOs so far this year. This is the smallest figure since 2011 and only about half the annual average of 35 listings.
Funds raised through IPOs also reached just $917 million, the lowest level since 2022. Go, Japan's leading taxi application, recently succeeded in raising 89 billion yen through its IPO, but this paradoxically demonstrated that there had been no notable new listings over the past six months, according to assessments.
Some observers note that Japan's IPO weakness contrasts with other Asian markets. Hong Kong raised $13 billion in its IPO market in the first quarter of this year, ranking first in the world.
Experts point to the shortage of AI startups as the problem in Japan's IPO market. With few promising startups in the AI, data center, and semiconductor sectors, there is a lack of listing candidates themselves. Yusuke Minowa, co-head of capital solutions for Goldman Sachs Japan, said the stock market has "a favorable atmosphere toward semiconductor and AI infrastructure-related companies," but added that "for other sectors, investors' selection criteria remain very strict."
Cumbersome listing procedures are also cited as an obstacle. In Japan, existing companies must submit two years of audited financial results, and even startups must submit at least one year, to pursue an IPO. Market participants explain that these review standards are far stricter than in major markets such as the United States.
As a result, observers say it will not be easy for the IPO market to recover in the short term. Although the AI investment frenzy has caused valuations of related companies to soar, the pool of companies that can leverage this to quickly go public is limited.
However, some express hope that the atmosphere may gradually improve from the end of this year. Shu Nagata, head of global capital markets for Bank of America (BofA) Japan, said, "We hope IPOs will begin to increase again from the end of this year or next year," adding, "But this year, due to the Iran conflict and market volatility, companies are carefully watching whether now is the right time to list."
Go, which recently listed, is also seen as an example showing the potential of Japan's IPO market. Despite being a company in a heavily regulated domestic industry, it recorded a high level of foreign participation, with overseas investors allocated 70% of the entire offering. Kenji Taneda, head of Skadden's Tokyo office, said, "Just 10 years ago, it was very rare for a Japanese startup to attract the attention of global investors through an IPO," interpreting that "at the very least, interest among companies seeking to pursue IPOs targeting global investors is quite active."
