This article first appeared on Diligent Market Intelligence's Activism newswire. To register for a demonstration and trial of the product, click here.
Activist investors pushed further into Japanese boardrooms during the first half of 2026, challenging not only how companies use their cash but also who should run them.
Activists publicly targeted 139 Japanese companies during the period, up 24% from 112 a year earlier, according to Diligent Market Intelligence (DMI) data. Japan accounted for 18.7% of the 744 companies targeted globally, up from 15.4% on the opening half of 2025, cementing its position as the world’s second-largest market for activism after the U.S.
The continued surge reflects a Japanese market where corporate value has risen faster than governance standards at many companies, according to Oki Matsumoto, chair and chief investment officer at Japan Catalyst. “There are still many good companies in Japan with weak governance and untapped value,” he said. “So, we have great opportunities for activists.”
But the boom is entering a more difficult and political phase. Campaigns are becoming more ambitious, shifting from demands for buybacks and balance sheet repair toward management changes, operational improvements, portfolio restructuring, and industrial consolidation. At the same time, their success has prompted lawmakers and corporate executives to question whether some activist tactics, and particularly activist ties to private equity, serve ordinary minority shareholders.
“Activists are not necessarily bad, but we must ask if they are not overly leaning toward the pursuit of short-term profits,” LDP lawmaker Yasuhisa Shiozaki said.
Changing demands
The changing mix of demands illustrates the shift. Activists made 32 demands to appoint personnel during the first half, up 45% from 22 a year earlier, while removal demands rose to 29 from 24. Operational demands increased to 14 from nine and governance demands to 86 from 75. By contrast, demands to return cash declined to 56 from 63. The categories can overlap within a single campaign.
Nels Hansen, a White & Case partner in Tokyo, said activists are becoming “more and more sophisticated in the types of proposals that they make.”
The shift is particularly visible in campaigns challenging executives and directors. Oasis sought the removal of Kadokawa President Takeshi Natsuno, arguing that the publisher had failed to turn its valuable intellectual property into sustainable earnings. Asset Value Investors targeted Rohto Pharmaceutical Chairman Kunio Yamada over the company’s loss-making regenerative-medicine business. Dalton Investments nominated directors at six companies, including at Bunka Shutter, where it criticized an aging board.
One Japan-focused shareholder activist, who asked to remain anonymous, argued that Japanese boards have historically allowed executives to retain unprofitable businesses for years without consequences. Being chief executive is not a “God-given right,” the activist said. “Management should be judged case-by-case, particularly when a company has failed over several years to improve profitability or exit loss-making operations.”
Activists also won a closely watched legal case in July, when the Tokyo District Court rejected the 800 yen per share price used in the management buyout of Shidax and set fair value at 950 yen, an 18.75% increase. The ruling followed an appraisal claim by Oasis Management, which opposed the share consolidation used to squeeze out minority investors.
Political backlash
The growing pressure on management has produced a political response. On June 18, Japan’s ruling Liberal Democratic Party established a project team to examine the conduct of activist investors and private equity firms. Its draft proposals included tougher requirements for shareholder proposals and extraordinary meetings, restrictions on proposals that intrude into management execution and potential limits on appraisal claims by investors who acquire shares only after a transaction is announced.
“This is definitely pushback,” said Hansen, although he noted these are not new proposals or new grievances. The corporate-defense lobby previously took the proposals to regulators, who “really saw through them,” he said. After failing to gain traction, it turned to politicians and assembled “a coalition of CEOs with a grievance” to pursue changes it could not secure through regulators.
Matsumoto similarly attributed much of the backlash to “poor CEOs” who are nostalgic for the previous system and believe activists are “bothering” their companies.
The most sensitive issue is whether shareholder activists, who often call for the sale of a company, collude with private equity firms that acquire them to the detriment of other shareholders.
Hansen called the alleged collusion described by politicians as “far-fetched,” noting that activists ordinarily want the highest possible sale price, while private-equity buyers want to pay less.
Matsumoto nevertheless said there is “an intrinsic kind of a conflict of interest between activists and private equity,” particularly when an activist rolls its investment into a sponsor’s acquisition vehicle. In those circumstances, the activist may be able to recover value through its continuing investment even if ordinary shareholders receive a lower tender price.
PE deals
Activist campaigns have helped initiate sale processes and have sometimes provided the shares needed for sponsors to complete take-privates. At Fuji Soft, 3D Investment Partners helped attract potential bidders and, together with Farallon Capital Management, committed shares to KKR. At Taiyo Holdings, Oasis agreed to tender its approximately 15.6% stake to KKR. ValueAct Capital and Oasis were the largest shareholders in Topcon when KKR and Japan Investment Corporation agreed to take the company private.
No evidence has emerged of collusion in these cases. And the broader data does not show activists increasingly pushing Japanese companies into transactions. Activists made six demands that companies pursue M&A during the first half of 2026, down from seven a year earlier.
The scrutiny comes as private equity becomes increasingly important to Japan’s restructuring. Japan-related M&A reached 51 trillion yen in 2025, up 112%, according to Nomura figures based on LSEG data. Bain & Co. estimated Japanese private-equity deal value at 4.8 trillion yen, marking the fifth consecutive year above 3 trillion yen. Median Japanese private-equity returns were strong at 2.5-times invested capital with a 31% internal rate of return, compared with 2.1 times and 22% in the U.S.
More activism
Political resistance may alter the rules governing activist campaigns, but it will not remove the valuation gaps, fragmented industries and governance weaknesses that brought activists to Japan in the first place.
Japan also remains unusually fragmented. Matsumoto noted that the country has roughly 4,000 listed companies and around 100 conventional banks. He estimated that the three largest competitors in a typical Japanese product category hold approximately 25% of the market, compared with roughly 85% in the U.S.
The next stage of Japanese activism will therefore ask more than whether companies should return excess cash. It will ask whether businesses should replace their leaders, sell divisions, combine with competitors or remain publicly listed at all.
Consolidation “is good for Japan as a nation, and that’s good for the companies, and that’s good for all stakeholders,” Matsumoto said. “That should happen going forward in Japan, I believe.”
