Core Viewpoint - Japanese family businesses are facing dual challenges of a lack of interested and capable successors and high inheritance tax rates, leading to an increasing trend of selling businesses to private equity funds, which has fueled the private equity boom in Japan [3][4]. Group 1: Market Trends - The annual transaction volume in Japan's private equity market has exceeded 3 trillion yen (approximately 20 billion USD) for four consecutive years, with a year-on-year increase of over 30% this year, reaching 29.19 billion USD [7]. - Approximately one-third of Japanese small and medium-sized enterprise owners aged 70 and above will have no successors by 2025, according to a World Economic Forum report [7]. - Over 90% of Japan's small and medium-sized enterprises are family-owned, with over 65% of private equity mergers and acquisitions stemming from succession cases [8]. Group 2: Factors Driving Change - The high inheritance tax rate in Japan, which can reach up to 55% for large estates, often forces heirs to sell assets quickly to raise cash, making private equity an increasingly attractive option [8]. - Cultural shifts are occurring, with traditional views on selling equity changing as family business owners recognize the need for investors, including foreign private equity investors [9]. - The "employment ice age" in Japan has exacerbated the leadership crisis, as there is a lack of experienced professionals to take over businesses [7]. Group 3: Regulatory and Economic Environment - Regulatory reforms introduced by the Japanese government since 2015-2016 have spurred the growth of the private equity market, including mandatory external directors and increased capital return requirements for listed companies [11]. - The long-term depreciation of the yen has made Japanese assets relatively cheap for dollar investors, further increasing foreign private equity investment [11]. - Despite the growth, private equity investment in Japan currently accounts for only about 0.4% of the GDP, compared to 1.3% in the U.S. and 1.9% in Europe, indicating that Japan remains a developing market in terms of private equity maturity [12].