Japan Steps Lightly Into Private Credit - Global Finance Magazine

The Bank of Japan has warned that growing links between Japanese financial institutions and global private credit funds could have implications for financial stability. The concern, as described in Global Finance Magazine, is less about Japan embracing the private credit industry, which is valued at more than $2 trillion globally, and more about Japanese banks and institutional investors becoming part of it just as vulnerabilities in the asset class draw greater scrutiny.

For now, regulators see no evidence of a systemic problem. According to reports, the Financial Services Agency has been examining financial institutions' lending and investment exposure to private credit, and Finance Minister Satsuki Katayama has said Japan's exposure is not substantial. Nonetheless, Japanese banks have increased financing to global private credit funds in pursuit of higher returns while exploring domestic strategies in the same vein, creating potential transmission channels for overseas stress. SMFG's banking division took a 4.9% stake in U.S.-headquartered Ares Management in 2020 to support its private credit business, and earlier this spring SMFG and Nippon Life were reported to be in talks on a fund of at least 500 billion yen to finance leveraged buyouts, real estate and mezzanine transactions.

Yuuichiro Nakajima, managing director at Tokyo-based M&A advisory firm Crimson Phoenix, argued that the market is only emerging and is not replacing bank finance in any meaningful way. He noted Japan may need private credit less than the U.S. or Europe because its banks remain deeply embedded in corporate finance and provide relatively inexpensive funding. He expects private credit to complement traditional lenders as Japanese M&A grows larger and more complex. Japanese domestic M&A reached a record 53 trillion yen in 2025, according to LSEG data cited by Reuters. Take-privates, succession deals, overseas acquisitions and infrastructure investment are generating financing needs that can strain conventional bank structures, particularly where flexibility, speed or longer maturities matter.

Global managers are positioning for this opportunity. According to reports, Apollo Global Management, Blackstone and KKR are building private-credit capabilities in Tokyo, although industry executives expect adoption to take years. The article cautions that the domestic opportunity should not obscure the systemic risk concern, as private credit globally has grown rapidly while remaining relatively opaque and illiquid.