Japan's $158 billion M&A wave shifts: from China to ASEAN and the United States

Japanese companies are reshaping Asia's capital landscape with M&A deals totaling $158 billion. According to Hikaru Okada, Head of Deal Advisory for KPMG in Asia Pacific, the destinations of Japan's cross-border M&A are shifting significantly from China toward North America and ASEAN countries, driven by a combination of tariff uncertainty, supply chain resilience requirements, and geopolitical risks.

From China to ASEAN: The Logic Shift in Capital Flows

Over the past decade, China was the core destination for Japanese companies' overseas M&A, particularly in manufacturing and consumer sectors. However, as US-China trade frictions escalate, tariff barriers rise, and China's market growth slows, Japanese companies' strategic focus has begun to shift. Okada notes that over the next six months, Japan's capital inflows into China may remain low, although certain technology and industrial sectors still hold appeal.

Meanwhile, ASEAN countries have emerged as alternative options. Indonesia, with its vast population base, rapidly growing consumer market, and industrialization progress, is attracting capital attention from Japan, North America, and even Korea and China. Vietnam, Thailand, and Malaysia are also benefiting from their solid manufacturing bases and supply chain location advantages.

Tariffs Driving a "Localization" M&A Logic

US tariffs on Chinese goods are reshaping Japanese companies' global deployment strategies. Okada indicates that higher tariffs make "local production, local sales" more economically rational than exporting from Japan or other Asian countries. This is driving Japanese companies to increase acquisitions of North American assets to get closer to end markets and mitigate tariff risks.

Within the Asia-Pacific region, the most active M&A sectors are energy, technology, media & telecom, industrial manufacturing, financial services, and consumer retail. Australia and ASEAN remain the main destinations for Japanese capital, but the transaction logic has shifted from cost arbitrage to market access and supply chain security.

Japan and South Korea: Indirect Channels into ASEAN

One often underestimated opportunity lies in the Japanese and Korean markets themselves. Okada points out that these two economies are institutionally closer to the West and naturally attractive to institutional capital. More importantly, many Japanese and Korean companies have established manufacturing bases and distribution networks in ASEAN.

For Western investors, acquiring a Japanese or Korean company can indirectly grant access to its ASEAN business footprint, avoiding the need for high-risk greenfield investments or joint ventures directly in Southeast Asia. This "curved entry" strategy is becoming a common option in deal structuring.

Outlook: Deals Test Strategic Depth

For M&A participants, the core test lies in whether a deal can truly achieve supply chain strengthening, geopolitical risk reduction, and proximity to end markets. This round of capital reorientation by Japanese companies not only reflects the shifting economic center of gravity within Asia but also signals a deeper global supply chain adjustment toward "nearshoring" and "friendshoring."As ASEAN's infrastructure and consumer markets continue to upgrade, and as the uncertainty of U.S. trade policy persists, the next phase of Japan's M&A wave is likely to further deepen its industrial integration with ASEAN while consolidating its high-value-added presence in North America.