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Finance

Carlyle to invest over $9bn in Japan on post-pandemic reform hopes

Private equity firm taps flood of risk capital to boost spending plans

The Carlyle Group sees corporate Japan starting to catch up with Western markets when it comes to reform.   © Reuters

TOKYO -- U.S. private-equity firm Carlyle Group plans to pour more than 1 trillion yen ($9.4 billion) into Japanese businesses over the next three to five years, anticipating that the changes wrought by the coronavirus pandemic will create new investing opportunities as companies reorganize.

The firm set up a 258 billion yen Japan-focused buyout fund in March, the largest of its kind, and plans to direct money from an $18.5 billion U.S. fund and a $6.5 billion Asia-oriented fund into the Japanese market.

"Momentum toward reform at Japanese companies is picking up" after lagging behind Europe and the U.S., said Hiroyuki Otsuka, a managing director in Carlyle's Japan operations, who noted the market's "high potential."

The firm looks to invest in operations spun off by big companies or in listed corporations seeking to go private, and its cash supply will enable deals running into the billions of dollars. It will also consider investing in companies with strong fundamentals but temporary capital shortfalls, through such means as preferred shares.

Carlyle has been filling high-level posts in its Japan operations since last year, seeing the market coming to a turning point, and plans to continue expanding its investment team there.

"Japan has drawn the most attention from investment funds, and we want to take advantage of the ample global supply of risk capital," Otsuka said.

While the pandemic has created turmoil in financial markets, monetary easing by central banks has created a flood of funds to invest. Carlyle likely anticipates demand from investors to put more capital into certain deals.

Washington-based Carlyle has invested more than 300 billion yen in Japan so far, mainly in deals involving domestically oriented businesses, such as its participation in last year's acquisition of Okinawa's Orion Breweries. It plans to continue making investments of hundreds of millions of dollars in family-dominated companies facing succession vacuums.

The firm had $224 billion in assets under management worldwide at the end of 2019.

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