Japan’s New Horizon: Investment Opportunities, Corporate Transformation and the Private Capital Boom

Summary

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Wall Street Week – "Japan’s New Horizon: Investment Opportunities, Corporate Transformation and the Private Capital Boom"

Host: David Westin (Bloomberg)
Date: February 21, 2026

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Overview

This episode of Wall Street Week explores the transformation underway in Japanese capitalism, spotlighting Japan’s emerging investment opportunities, its corporate governance revolution, and the private capital boom. Host David Westin reports from Tokyo, embedding with Apollo Global Management and speaking with leaders from Apollo, Sony, Panasonic Automotive, the Tokyo Stock Exchange, and policy experts. The discussion traces Japan’s journey from economic stagnation to a dynamic period of reform and opportunity, especially as it confronts demographic challenges, inflation, and the need for massive investment in technology and productivity.

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Key Discussion Points & Insights

1. Japan’s Long Economic Slumber and Awakening

• Historical Context

  • Japan’s "lost decades" followed the burst of its asset bubble in the 1990s, resulting in stagnation and deflation ([00:57]–[03:05]).
  • Real GDP growth plummeted to near zero, with government bond yields turning negative and the Nikkei index in stasis for over 30 years ([03:05]).

• Shifting Outlook

  • Recent adversity (COVID, supply chain shocks, energy price surges) forced change and generated inflation, ending deflation ([04:54]–[05:09]).
  • Inflation reached nearly 3%, transforming the risk calculus for both households and corporations ([03:46]–[04:54]).

2. Generational and Structural Reform

• Corporate Governance & Policy Reform

  • Prime Minister Abe’s 2015 market reforms and successors’ dedication to corporate governance improvement ([06:05], [08:06]).
  • Rise of “womenomics”: policies to increase female and elderly labor market participation ([06:21]–[12:22]).

• Hiromi Yamaji (Tokyo Stock Exchange):

  • Emphasizes need to “transform the mindset of management”—seen as both the greatest challenge and opportunity ([08:58]).
  • Record-breaking year: Over 5,100 mergers/acquisitions valued at 35 trillion yen ([10:08]).
  • Push for capital efficiency: Over half of listed firms below book value, requiring explanations and improvement ([10:32]).

"To transform the mindset of the management of the companies—that's very important and also probably the most challenging thing." – Hiromi Yamaji, [08:58]

3. Challenges of Demographics and Productivity

• Aging Population

  • Workforce peaked in 1990; aging population now limits labor market expansion ([11:13]).
  • Inclusion of more women, elderly, and foreign workers, but this has a ceiling ([12:22]).

• Investment Needs

  • Demand for long-term capital in manufacturing, energy, AI, and infrastructure is "measured in trillions" ([13:28]–[14:16]).
  • "We are about to spend every dollar since the invention of fire." – Mark Rowan, Apollo ([13:28])

4. The Rise of Private Capital

• Transition from Cash and Banks

  • Japanese households historically allocated >50% of financial assets to cash; now shifting slowly toward equities and alternatives ([16:21]–[16:54]).
  • Demand emerges for products and solutions better suited for retirement and inflation protection ([03:46]).

• Private Credit as ‘Third Way’

  • Traditional Japanese finance: bank loans or equity. Apollo offers private credit as a new alternative to fund complex, long-dated corporate needs ([18:43]–[21:25]).
  • Private credit supplements rather than replaces banks: suitable for large, transformational CAPEX ([20:41]–[21:55]).

"Most of what we're doing is long-dated with long-dated capital. And that is not what the banking system does well." – Mark Rowan, Apollo ([19:00])

• Adoption & Education
  • Resistance is low, but education is key. Many deals are made in partnership with traditional Japanese bankers ([22:51]).
  • Acceptance of private markets is set to accelerate as corporations adapt to new realities.

5. Corporate Transformation in Practice

• Market-Driven Change

  • Management accountability, portfolio realignment, and capital efficiency take center stage ([28:22]).
  • Companies actively reconsidering whether to stay listed, resulting in a spike in delistings and spin-offs ([29:53]).

• Case Study—Panasonic Automotive (Masashi Nagayasu)

  • Positive view of being carved out from Panasonic and working with Apollo: greater focus, agility, and operational discipline ([31:07]–[33:54]).
  • KPI Focus: Key metric is EBITDA minus CAPEX (E–C); target is to triple this value by 2027 ([34:20]).

"Partnering with Apollo we can really 100% commit to automotive sectors field...this is rather positive for us to really stick to that strategy." – Masashi Nagayasu, Panasonic Automotive ([32:21])

• Case Study—Sony Transformation (Hiroki Totoki)
  • Shift from hardware to content: Entertainment increased from 30% to 60% of Sony’s revenue in a decade ([37:14]).
  • Gaming is the largest component; major investments in music catalogs and partnerships with Apollo ([37:51]–[41:00]).
  • The rationale for private capital partnership: Music catalogs are low risk, fit long-term private capital needs ([41:00]).

"The music capital is relatively low risk and low return...that really fit to the, you know, like private credit and you know, need a long time horizon." – Hiroki Totoki, Sony ([41:00])

6. Cultural Shift and Corporate Identity

• Updating Stereotypes

  • The “salaryman” is an outdated stereotype; labor market, especially among new graduates, is more dynamic and fluid ([44:42]–[46:14]).
  • About one-third of new graduates today want to join startups over traditional companies ([46:14]).

• Legacy vs. Innovation

  • Companies value tradition (founders’ philosophy/enduring values) but recognize need for adaptive business models ([47:42], [48:14]).
  • Change management: Both Panasonic and Sony highlight the importance of internal communication to align employees with transformation ([49:31]–[50:39]).

"I have to show the result to the employee to make it everyone the positive way." – Masashi Nagayasu, Panasonic Automotive ([48:26])

• Culture vs. Macroeconomic Forces
  • Japanese conservatism in finance is seen as a rational reaction to economic conditions, not an innate cultural trait ([51:14]–[51:24]).
  • Rising inflation triggers behavioral change toward risk-taking ([52:06]).

"There's nothing like 3% inflation to get people to think differently." – Mark Rowan, Apollo ([52:06])

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Notable Quotes & Memorable Moments

• On Generational Change:
  "In many ways they are the first of the western democracies to face real aging retirement and high levels of government debt. And what's happening here is totally different than people's expectation..." – Mark Rowan, Apollo ([03:46])

• On Market Reform:
  "The fundamental challenge is to transform the mindset of the management." – Hiromi Yamaji, Tokyo Stock Exchange ([08:58])

• On Risk Appetite:
  "Corporate Japan has been very risk averse. This might be a way in which begin to see an appetite for, you know, taking on more investment." – Maria Solis, Brookings ([29:25])

• On Private Capital’s Fit:
  "We provide a piece of capital that is in very short supply in Japan, investment grade, long dated, to finance what they need." – Mark Rowan, Apollo ([21:25])

• On Culture vs. Economics:
  "I don't think [cautiousness] is the cultural things. People basically make irrational decisions with the macro environment." – Eiji Ueda, Apollo ([51:24])

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Timestamps for Key Segments

| Segment | Timestamp | |--------------------------------------|------------| | Japan’s lost decades: context | [00:57]–[04:54] | | Mark Rowan on inflation’s significance | [03:46] | | Corporate governance transformation | [06:21]–[09:24] | | Hiromi Yamaji on management mindset | [08:58] | | Labor force challenges | [11:13]–[12:32] | | Capital needs for growth | [13:28]–[14:16] | | Shift from cash to equity/alternatives | [16:21]–[16:54] | | Private capital’s role (Rowan, Ueda) | [18:43]–[21:55] | | Case study: Panasonic carve out | [31:07]–[34:14] | | Case study: Sony transformation | [35:06]–[41:23] | | Cultural shift­, changing workforce | [44:42]–[46:14] | | Culture vs. macroeconomics | [51:14]–[52:34] |

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Conclusion

Japan is at a pivotal moment, moving beyond the stigma of stagnation into an era characterized by corporate reform, growing investment opportunities, and the integration of private capital. Aging demographics and historically risk-averse practices are now intersecting with policy shifts, inflationary pressures, and a broader appetite for risk and innovation. The stories of companies like Sony and Panasonic Automotive, as well as evolving attitudes towards capital and labor, illustrate a Japan in transformation—one where both ancient culture and modern strategy are rapidly evolving.

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Transcript

[A]

This is Special Agent Riegel, Special Agent Bradley Hall.

[B]

The time is approximately 11:15am about to

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start consensual telephone call with Dr. Daihua Tsang.

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China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

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I'd never seen that much evidence in

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my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question of

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his life, and that's a unicorn.

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This is a story of the inner workings of the MSS and how one man's ambition and mistakes opened its vault of secrets. Listen to the Six Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcast. This is Wall Street Week. I'm David Westin bringing you stories of capitalism. This time, capitalism Japanese style. This is an ancient land with imperial dynasty stretching back over a thousand years. Apollo Global Management invited us along as it convened a meeting of its 200 partners from around the world to see firsthand the investment opportunities it sees in Japan today, a world that has not traditionally been associated with risk. We're going to talk with Mark Rowan, the head of Apollo, as well as the leaders of Sony, Panasonic Automotive and the Tokyo Stock Exchange. But we start with the story of Choroku. That's a Japanese term meaning falling behind. In 1980s, Japanese industry was the envy of the world in a variety of sectors such as automotive, electronics and steel. And as a result, asset values went up, particularly here in Tokyo, where real estate values went sky high, supported by patient capital that did not demand a lot of returns. The 1990s, though, saw that asset bubble burst. And when the Japanese government and Japanese banks did not step in aggressively, they took what was a lost decade and turned it into a lost three decades.

[C]

Most people's expectation of Japan or business mindset of Japan is 30 years of

[B]

stagnation, I think, you know, we call the lost ages during decades and we do not have substantial growth in Japan.

[D]

Japan faced the deflation for very, very long time.

[E]

Japan has been, you know, suffering from deflation for more than two decades.

[A]

In the late 80s, Japan's economy grew by as much as 6.7% a year, only to have that growth plummet for most of the next 30 years, hovering between 0 and 2% and contracting during the great financial crisis and the COVID pandemic, relegating what had been the third largest economy in the world to number four. As Germany surged past, the Nikkei stock market went 34 years without setting new highs. Japanese government bond yields turned negative and stayed there for years. But all that could now be changing as Japan emerges from those lost decades.

[C]

What a lovely day in Tokyo.

[A]

Mark Rowan is CEO of Apollo Global Management.

[C]

This is a savings culture and holding onto your cash or leaving your money into JGBs for the past 30 years has been fine because there's been no inflation. In fact there's been deflation. All of a sudden you have closer to 3% inflation, you have interest rates up for the first time. And that savings is going to be the deployed productively. And now some of it has to go toward retirement. They will want better solutions for retirement, but some of it is just going to keep up with purchase price and purchasing power. I think about what's happening in Japan and in Japan they're going through generational change. And it's generational change in corporate governance. It's in interest rates, it's in government policy. And in many ways they are the first of the western democracies to face real aging retirement and high levels of government debt. And what's happening here is totally different than people's expectation because most people's expectation of Japan or business mindset of Japan is 30 years of stagnation. And that is so dynamic here today.

[A]

The thing that got things going again for Japan was ironically adversity. As supply chains came under stress from the COVID shutdown and a war in Ukraine put pressure on energy prices. A big problem for a country dependent on oil from abroad.

[D]

With the supply chain breakdown, corporate has executes to transfer the price to the retail. So now the CPI started to suddenly, which has been 01 negative for a very long time, suddenly went up to almost 3%. If she can get 2 third, that's a bond.

[A]

Aji Wada is head of Asia Pacific for Apollo.

[D]

Everybody has to think differently. So with the defrational environment, cash has been the king. But with the inflation at close to 3%, cash is not the right assets to own. It's actually the worst assets to own. So that has to put the pressure on a lot of people to think about things differently.

[A]

Even before the return of inflation, those responsible for Japanese markets were thinking differently, starting with Prime Minister Abe's call for market reform back in 2015.

[F]

And it's true that for maybe a good decade Japan did struggle in finding its way out of that banking crisis.

[A]

Maria Solis is director of the center for Asia Policy Studies at the Brookings Institution and author of Japan's Quiet Leadership.

[F]

But the fact is that we have overused the image of the last decades because this has not been a period where Japan has stood still and people refer to this period as 30 years. And a lot has happened in the economy, in the politics, international projection of Japan that actually shows that undercurrents of change have repositioned where Japan stands today. Some areas, actually there was a lot of progress. I think in the area of corporate governance. You do see important changes there. I also believe that the notion of womenomics, the idea that Japan needed to create conditions for women not to have to choose between a career and a family, raising a family, those also were very, very positive. So much so that Japan actually has a very high level of female labor participation.

[A]

As much as Prime Minister Abe may have laid the groundwork for reform, the state of the economy did not demand the changes he wanted for that. They needed 3% inflation to kick in.

[F]

Well, it has changed everything. It has changed the politics, it has changed the main economic challenges that the country faces. And I think in many ways it has redirected areas where reform is necessary.

[A]

Now inflation has returned and there's a new Prime Minister in town, one who's just won a landslide victory and seeks to take Abenomics reform to a new level.

[E]

So many significant changes are happening in the Japanese, not only Japanese market, but also Japanese society.

[A]

Hiromi Yamaji is group CEO of the Japan Exchange Group, which oversees the Tokyo and Osaka stock exchanges. What was the role of government, the Japanese government in the reforms?

[E]

I think, you know, since the Prime Minister Abe supported our governance reform back in 2015, I think all the successors of Mr. Abe, like Mr. Suga, Mr. Kishida, Mr. Ishiba, and the current Ms. Takaichi, all of them were quite big supporter of governance reform because all of them were convinced that growth of the private sector is essential for the growth of entire Japanese economy.

[A]

Since taking over the TSE in 2021, Yamaji has implemented a series of reforms to encourage Japanese companies to become more profitable and more accountable. Your reforms of the markets has various aspects to it, including price to book ratio and interlocking ownership of equity and independent directors. What are the most important ones?

[E]

I think to transform the mindset of the management of the companies. That's very important and also probably the most challenging thing. And PBR is just kind of a financial indicator to just gauge how much you progressed. But I think a fundamental challenge is to transform the mindset of the management,

[A]

not all minds are willing to be transformed. Have you had some management changes in order to respond to their.

[E]

Well, I think, you know, at least once a year we've analyzed the current situation of the Japanese market or Japanese companies and we are not the entity to assess their progress. The global investors is the, you know, the people who assess how much progress we've made. And you know, last year we. The most recent one, we did a analysis of a current situation December last year Based upon the 400 global investors domestic and overseas.

[A]

If the markets are any judge Yamagi's efforts are bearing fruit.

[E]

Last year was a record high, more than we have 5,100 Mondays and the total amount was 35 trillion yen. Both of them are record high. And that means that the buyer side seeking for say more growth or argent needs for growth and the seller side is trying to reorganize their business portfolio.

[D]

Tokyo Stock Exchange pushing the corporate to create more efficiency in the capital usage for corporates and ROE has been very, very low. And more than 50% of the company listed in Japan has been trading below the book value. So they are pushing for capital efficiency and they need to explain the reason why they trading below the book.

[A]

The Japanese push for higher returns in response to reflation comes against the backdrop of a long term challenge that's increasingly common in major economies around the world. Need a rapidly aging workforce.

[D]

Population between age 14 to 65 hit the peak in 1990. And since then, because society started aging, people spend less. So always demand shrink faster than supply. So the country faces long term deflation and low growth.

[C]

I think we're looking at things that are structural that are going to take place over the next five to 10 years. The need for Japan to provide for its aging population and to deal with its aging population. The need for Japan to finance what it needs to finance and the opportunity that Japan has.

[A]

Japan responded to the challenges of its aging workforce by adding workers from groups that had been on the sidelines.

[F]

Well, this is clearly one of the most serious challenges because the sheer drop in the level of a population, the absolute numbers, but also the graying of the population. The other one has of course to bring in women into the workforce, to bring in the elderly, who in Japan tend to be still very active, and to make sure that you can as much as possible maximize labor participation.

[A]

But there is a limit to how many women, elderly and foreign workers Japan can bring into the workforce. What does reform of capital markets do to help that problem?

[E]

I think, you know, the corporate governance reform says that we'd like to see more active female workers in the, in the workforce and also more senior persons are working really in Japan now. The labor force increased in Japan, but obviously a female job participation as well as senior members job participation. There's a seeding. I think we don't expect too much from those new forces coming in. So I think Japanese companies have been making huge investment into automation or digitalization, AI usage. I think those are very important to enhance productivity. Even though our population has been shrinking and also is going to shrink in the future.

[A]

What are the large long term capital needs that companies say I need to have this for a long period of time.

[C]

This is manufacturing, this is energy, this is AI and data. This is infrastructure. These are the big buckets that we're looking at. And the scale just of the infrastructure market or as I said, just of the AI data energy market as one package is beyond anything we can comprehend. This is measured in trillions. Sometimes I joke and I say we're about to spend every dollar since the invention of fire and that's what we're doing. We are as a world going to issue more debt, access more capital in 2026 than ever before. I think this is ultimately about growing the pie. I think the Japanese were very defensive for a long period of time with good reason given what was happening in the home market. I think there's a new swagger

[A]

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[A]

This is a story about henkaku. That's a Japanese term meaning fundamental reform. We've come to Japan to see how and why it is changing the way it does business, Changing what it expects from its corporations and changing what it expects in its investments, not just for the sake of change, but in order to raise the capital needed to invest in productivity. Over the last three decades, Japan fell from second to fourth in the ranking of world economies. As it struggles to climb back up the leaderboard, it is focused on investment. In this case, trillions of dollars worth.55%

[D]

of the assets sits in cash. Historically, and the corporate has been accumulating a lot of cash on balance sheet because they want to be safe and they want to be sustainable. And the cash is the safest assets for them to own. So even though the rate is lowest in the world, the ratio of the cash on balance sheet among all the corporates was the highest in the world.

[A]

That must be a lot of cash.

[D]

It is. The retail asset is 2,000 trillion yen. So that's a lot of cash.

[A]

While almost 55% of household financial assets in Japan sat in cash and deposits in 2022, a figure far higher than the US or Europe, by 2024, that number had inched lower to around 50% and the percentage of assets in equity markets had crept up to 14%. The head of the Tokyo and Osaka stock exchanges, Hiromi Yamaji, says that many Japanese companies are starting to use that cash to change the way they do business.

[E]

Japanese companies are quite receptive for new development of technologies like AI. I think Japanese companies are already adopters of new technologies, but at the same time, how do we take advantage of those new technologies? That you have to be quite serious how to utilizing what kind of areas. So now we are still in the very early stage, but I think Japanese companies are quite receptive to those new ideas.

[D]

Japan is, I think, well positioned for the industrial renaissance, the energy shift, supply chain breakdown, and they need to rebuild it. AI changes. There are a lot of big themes going on where companies need a lot of CapEx and the size of the new finance needs is growing so fast. That big demand for the CAPEX will create a lot of demand for new finances, which a lot of capital can shift to.

[A]

Japan may have a big need for investment. It may have the capital that's needed, but are its financial institutions in a position to direct the capital to where it is needed and at scale?

[C]

Japan is like, I would say, like many economies. If you think about the structure of the Japanese market, it is primarily two financial products, bank debt and equity.

[A]

Apollo CEO Mark Rowan sees his company as providing a much needed third way to finance the capital investment.

[C]

Japan needs the equity market in country. The context of the world is actually quite small. Although it is the second largest equity market in the world, but it is roughly the size of Nvidia. Just to put things in perspective, there's not the well developed, you know, kind of corporate bond market that exists throughout the US and so I think what we're watching not just in Japan but around the world is corporate CFOs. Corporate treasurers now understand that there are three types of finance. Things that are really highly rated and short. You want to be with your banks. There's no better provider equity. Very, very expensive public markets for plain vanilla, very, very good execution. Everything else comes to the private market. The largest part of the private market today is investment grade. It is these large companies who have these transformational opportunities who want to match long dated investments. And most of what we're doing is long dated with long dated capital. And that is not what the banking system does well. That is not what the public markets do well. And so you're seeing this extraordinary growth. In the US we've seen it in lots of ways. Meta's financing last year at some 30 billion. In Europe, we've seen the Europeans, who also have structural issues vis a vis capital availability, really embrace private finance. In Japan we're seeing the beginnings of that. The work we've done with Sony, the work we've done with smbc, the work we've done in financing buy now, pay later. Japanese companies is beginning to open up in the minds of CFOs and treasurers that there's just another alternative.

[A]

It's not that private credit firms like Apollo seek to replace Japanese banks. Apollo's team says that it can supplement what the banks do.

[D]

The public credit market is very, very small. I think there's only 60 trillion yen outstanding on the corporate bond market. Compared to the size of the finance, it's been quite small. So a lot of finance has been done by banks who is basically private credit. So I think there is a demand for longer dated capital and also complex capital because the bank can provide cheaper and short term finance. And with the huge CAPEX needs, they need longer term, more complex finance structure where the private capital markets can solve the problem.

[C]

For it. We will start to establish private as just another alternative for every CFO and every treasurer. And by the way, in partnership with the Japanese banking system because at the end of the day, we don't do what the banks do. We don't provide advice, we don't provide hedging derivatives, M and A, any other service. That's the purview of the banking system. We provide a piece of capital that is in very short supply in Japan, investment grade, long dated, to finance what they need.

[E]

It's growing gradually and I think it's a good alternative investment vehicle. I mean alternative funding vehicle from the viewpoint of the companies. As you said, used to be banks were the main creditors. But in these days because of the banking industry has so many restrictions, capital restrictions kind of things. So they, their capability to provide lending to a private sector is getting to a limited amount. So I think private credit can play a bigger role in Japan as well.

[A]

Firms like Apollo Global Advisors may see an important opportunity in the newly evolving Japanese markets. But are Japanese investors and companies receptive to adding private market alternatives to their means of financing? As you go out into the Japanese market, what resistance do you get to these new forms of investment vehicles?

[C]

I don't think it's resistance. I think again, just like in the wealth market, this is about education. In many instances we are not going to Japanese corporates directly. We're going with their longtime banker. In some instances, particularly when Japanese companies are financing overseas, we'll deal with them directly. Our team here is unbelievable. From our chairman Tanaka San, to the head of our Asian business, Oeda San, these are very well known, very substantive individuals who have been at the cutting edge of finance for a very long time. The weight we have put here, the intellectual capital we've put here, is second to none. I think we're at the beginning of a trend. But I think this is going to be just a fascinating market. For any number of reasons, I have

[A]

never seen a business strategy or an investment that doesn't have some downside risk. So what are the possible downside risks to this bright new future that you see?

[C]

Well, look, the downside risks are the same risks that exist around the world. So for me, the way I describe it is in my business career, most of the time, or I'd say 95% of the outcomes are between two sidelines. And sometimes we like what's on the playing field and sometimes we don't. Sometimes the economy is better or worse, sometimes the capital markets are better or worse, valuations better or worse, but we know how to navigate those things. And the chance of an outside the sidelines outcome was small and unpredictable. That's my normal setup today. I only think 70, 75% of the outcomes are between the two sidelines. And what's between the two sidelines is amazing. Capital cycle growth, employment, inflation coming down on a worldwide basis, lots of opportunity. But we can ignore that. There is an increased risk of an out of the box, out of expected outcome. And it's of a magnitude that investors, people like us, need to pay attention to that. And yes, there's always the credit cycle. I don't think that's what we're talking about. I think we're talking about geopolitics. I think we're talking about government deficits. I think we're talking about rates up and rates down. And so for the first time in a very long time, we are trying to address outcomes that perhaps could occur outside of what we normally see in front of us.

[A]

But absent one of those outside the sidelines events, Rowan sees his firm as well positioned for a bright future in Japan.

[C]

When I look at our toolkit, our toolkit starts with retirement services. We have been here any number of years. We are a very large reinsurance player to the Japanese market and we are creating products for Japanese retirees. Second, we're a provider of capital to industry, whether it's Sony or SMBC or others. Third, we are in the buyout business here. This is one of the best buyout businesses here. You've met with some of our portfolio companies or companies we've had an investment in here. It is a very robust market and a very interesting market. The capital coming off the sidelines from households is looking for better rates of return now that they are facing 3% inflation. And I expect this to be a very promising wealth market where people want safe yield, they want defensive equity, they want the kinds of things that have been available institutionally around the world for a long time that are now available as wealth products.

[A]

Coming up, the challenges and opportunities of changing things, shaking things up in the Japanese C Suite.

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[C]

There is a real corporate revolution going on. The notion of every company needing a plan to get above one times book and essentially using shame as a tool for reform has been very, very effective.

[E]

The management has their best position to formulate a plan how to improve it, improve the current situation company itself has to drive how to transform the company.

[A]

The combination of a reflating economy and market reforms in Japan are reverberating through corporate boardrooms and C suites, causing CEOs to rethink everything from how they finance their businesses to what businesses they want to have in their portfolio. Are we seeing yet the effects of the reforms? Are CEOs acting differently, more actively?

[F]

Well, I do think we're seeing changes. I think that we begin to see more diverse boards and we begin to see perhaps the taking more of opportunities.

[A]

Maria Solis is a Japan expert at the Brookings Institution.

[F]

I believe that this could be a good moment, I think to think about a new wave of investments. I think one of the challenges source of frustration is that corporate Japan has been very risk averse. This might be a way in which begin to see an appetite for, you know, taking on more investment.

[A]

Japanese companies willingness to rethink how they do business may extend even to whether they want to be listed on the Tokyo Stock Exchange.

[E]

The number of delisting used to be only 50 companies delisted. Now last year was 125 company delisted. And now this year 2026, already 16 announced to a delist. So I think a number of companies scrutinizing whether the keep listing is the best way for them to pursue growth.

[A]

As the head of the company overseeing both the Tokyo and Osaka stock exchanges, Hiromi Yamaji leaves it up to individual companies to decide their best path for growth. But since taking over, he has also implemented reforms that require disclosure and explanation of firm strategies to become more profitable.

[E]

Used to be Japanese companies didn't spin off any operations last year, only the half six months. Last year we had 280 carve outs spinoffs. So you know that means that they are quite serious, the seller side is quite serious to reorganize their business portfolio. But at the same time they are realistic enough that they recognize that they are not a good owner. I think that's a good sign.

[A]

One of those carve outs came in 2024 when Panasonic holdings sold a majority interest in Panasonic Automotive Systems to Apollo Global Management. Shares of Panasonic holdings have been on a tear ever since, up more than 70% since the deal was completed. It's amazing. Masashi Nagayasu is CEO of Panasonic Automotive now focused on the transition from automobiles as driving experience to a mobility experience. Something he calls joy in motion.

[G]

The value of the car is shifting from driving performance into the mobility experience which people are having in the car space. But individual person having a different sense of comfort like temperature as well. So we use our technologies and also AI enhanced technologies to fit to a personalization and make individual person make it more comfortable in the car.

[A]

Nagayasu says car bouts like Panasonic Automotives can bring with them a new focus on a more specific business.

[G]

Panasonic is conglomerate company and they have diversified business models and they have decided that automotive sector is not the focus. So on the other hand, partnering with Apollo we can really 100% commit to automotive sectors field. So this is rather positive for us to really stick to that strategy.

[E]

The purpose of the spin off is that probably that particular the owner of the spin off operation believes that they are not the best choice from the viewpoint of the business itself. In other words, they might be better partner for them and so that they believe there are maybe a PE funds which owns other operations related to this particular business. I think those are many different kind of ways thinking. But I think it's important for from the viewpoint of the company that they believe they are not a good owner of that particular company and also they are not the best owner to stimulate the growth of this particular business. I think, you know, Japanese companies started thinking many different kind of ways and that's good for the, for the entire economy.

[A]

In addition to focus, Nagayasu says a firm like Apollo can also bring its particular expertise in working closely with management.

[G]

So the way of the style Apollo is asking us is discipline. I take it in a very positive way with fewer Panasonic Group constraints. So I don't want to say the freedom, but we really can focus on what we need to do.

[A]

What sorts of profit goals or targets do you have for Panasonic Automotive?

[G]

We are not disclosing much of numbers. However, you know, our most important KPI right now is E minus C EBITDA minus CAPEX. We are aiming to triple this E minus C number from in 27 compared to 2024. And so far since, you know, partnership started with Apollo, partnership has been started and the number is showing in a positive way. And also looking ahead, the midterm, short term midterm goal, we are quite advanced in this situation right now.

[A]

Carve outs may help bring more discipline to companies like Panasonic Automotive motive. But there are other transformations in Japanese business that require injection of patient capital into existing companies. Transformations like the one ongoing at Sony under CEO Hiroki Totoki. Moving from manufacturing the electronics on which the world consumes entertainment to producing the entertainment itself.

[B]

Sony has already got a great reputation in the area of consumer electronics. But at the same time digitalization has happened and things move from the analog to digital in terms of the technology. And in digital era generally it's particularly different from the difficult to differentiate the products from the others in the area of the consumer electronics. And then it's very difficult to compete with the other players. And that environment invite new entrants to the industry. First from Korea and followed by China and particularly China. As you understand, they have enormous domestic market backed by that market, they try to export their products. The consumer electronics area now need a massive scale and competition field comes to volume and price. And unfortunately it's very hard to maintain that volume in Sony group.

[A]

How does the Sony transformation fit together with the broader transformation? Does it affect how you're transforming Sony that the entire industry is changing?

[B]

We forced to change because you know, when I came back from a subsidiary to headquarter and that was 2013, that was a very severe time and the financial performance is very bad and many good people were left company.

[A]

It's been a big change for Sony to branch out from its traditional position in consumer electronics. But it's already well into that transition. Around a decade ago Entertainment made up only 30% of its revenue. By 2024 it had grown to 60% of the company. Let's talk about the creative side. As I understand it, it's more than half of the business for Sony at this point. What are the component parts of that that you rely on?

[B]

That's including game and the music and motion pictures. And three, keep this entertainment business earn the more than 60% of revenue now.

[A]

And of those three, which is the largest one? Is it gaming?

[B]

Gaming, yeah.

[A]

So tell me about the gaming business

[B]

we are always talking about. PlayStation should be a best place to play from users perspective and at the same time best play to publish. Because we have a great relationship with a bunch of third party game publishers and of course we have great studios as a first party.

[A]

Sony's major games include international blockbusters like God of War, Ghost of Tsushima and Helldivers. But as successful as they've been, Totoki san prefers to supervise rather than be a gamer himself.

[B]

I'm good at thinking about a business model and including financial and also think about the top down approach. Which industry is suitable, which we have in Sony, which field we can capable to compete with the other companies. That kind of way of thinking is very helpful to develop my career.

[A]

Do you personally consume Sony creative product whether it's games or films or music?

[B]

I mean I love music and TV dramas and music but I cannot play games to Vividos. I can play but very, you know, primitive level.

[A]

And Sony is a major producer of the music and film that Totoki san loves.

[B]

We are doing good business in film and of course you know some films are volatile but you know they try to avoid such volatility. And we developed the portfolio to make a film and sometimes we do a deal with big distributors such as Netflix.

[A]

Anime is something many of us identify with Japan as almost uniquely Japan. Has it gone global?

[B]

Yes, now definitely thanks to the streaming big streaming platform. Now anime is simultaneously distributed, you know, at the same time worldwide basis. That helps you know the anime global hits as a law and you know that enable to mitigate the piracy risk

[A]

as well as part of its push toward content, Sony has made major investments in music catalogs building on its traditional strength. And that's where Apollo came in.

[B]

It's quite important because each capital resources have a different risk appetite as well as a different time horizon. And as we diversify our business and we need to acquire many asset classes and we can find out the best fit of the capital investment and asset class.

[A]

Is that why you entered a relationship with Apollo for music catalog because you need a long term time horizon?

[B]

Exactly. And the music capital is relatively low risk and low return. You know the asset class and that really fit to the, you know, the like private credit and you know, need a long time horizon as a capital and as such that's a great example.

[A]

It turns out that Totoki San has a long time horizon in his music taste as well. His favorite artist is a British rock band from the 90s, one that's recently gotten back together and one that over the years has worked with Sony in distributing some of their records. Do you have a favorite artist?

[B]

I actually joined the concert of the Oasis in Tokyo and they have a dome concert two days and I really enjoy and it's after 20 years they had concerts in Japan and a lot of fun are there and of course I heard all day's music as well and it's really great fun.

[A]

From automotive to anime, Japanese corporate leaders are changing the way they do business and finding new ways to capitalize those changes with the help of firms like Apollo. Coming up, is Japan truly different? We take a fresh look at what we thought we knew about Japanese culture.

[C]

I'm Barry Ritholtz inviting you to join me for the Masters in Business podcast. Every week we bring you fascinating conversations with the people who shape markets, investing and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market. Whether you own stocks, bonds, real estate, commodities, crypto. You really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Shiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors. Michael Lewis, author of the Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me. Barry Ritholtz. Listen on Apple, Spotify or wherever you get your podcasts.

[A]

This is a story about bunka. That's a Japanese term for culture. The Japanese have developed their unique culture over a thousand years. It's a culture that has informed the way Japan does business. Now Japan is pursuing a new economic strategy. Peter Drucker famously said that culture eats strategy from for breakfast. So what will happen as Japan's new economic strategy comes up against its ancient culture?

[C]

The economic growth of Japan has been

[A]

the most spectacular in recent history. A fine Example of what a system

[C]

of free economy can accomplish with wise

[A]

planning, determination and hard work. Many of us, many of us have an image in our minds of Japanese business traditions like the groups of interrelated companies known as keiretsus and the lifestyles of the salaried employees who worked at them.

[F]

Undercurrents of change have repositioned where Japan stands today.

[A]

Maria Solis of the Brookings Institution says the image of the salaryman was always a bit overdone.

[F]

The traditional image we have of the Japanese employee, the sale salaryman, is applied really to just a segment of the working population. The idea that people would stay in the same job all their careers and that there was this steady progression and that they would be extremely loyal to their company, they would not be seeking for opportunities. But many other workers in Japan who operated, who were employed by smaller companies never had that level of predictability. We believe that something like 38 to 40% of all employees in Japan are in this category of non regular workers. The corporations and the government have also tried to bring more flexibility to employment practices. And we begin to see that many employees now are doing these lateral changes and they do not expect stay in the same corporation all of their career. So I think that that's adding again more dynamism to the Japanese labor market.

[E]

The culture is changing.

[A]

Hiromi Yamagi of the Tokyo Stock Exchange politely suggests that the idea of the salaryman is at the very least out of date. There was the salaryman that we all talked about when you had a long term job, fairly quiet, not a lot of raises, but it was a lot of stability. This is a different world.

[E]

Well, yes, that's a kind of stereotype, kind of image of the Japanese workers. But it's amazingly since 2015 or 16, about one out of three new freshmen to the companies are thinking to leave the company to join their startups is around the most popular job. The university students to choose used to be like a bureaucrats or consultants or investment banks, those kind of things. But nowadays number of students or you know, the freshmen is trying to leave the current company and join the new startups.

[A]

And large Japanese companies are relying more on those startups, attracting new college grads. Companies like Masashi Nagayasu's Panasonic Automotive.

[G]

Our business model or profit model need to be also changed. So we need to have more capability to partner with many kind of industrial or automotive industry related sectors, including startup companies.

[A]

Even as Panasonic Automotive changes the way it does business and we and with whom it works to Preserve the best of the larger Panasonic culture. A culture established by the founder of its predecessor company, Konosuke Matsushita.

[G]

At the same time, Kei Matsushita is our own company's founder. This is no change forever. And Panasonic is almost 110 years history. But Panasonic Automotive has 80 years history. So we still put importance on our founders philosophy in our mind and this is our backbone. This won't change, but otherwise we can change.

[A]

One of the things you're changing is the name of the company.

[G]

Yes.

[A]

How do employees at Panasonic Automotive respond to changing the company? Because Panasonic's an iconic name.

[C]

Yeah.

[G]

You know, I've been working for 42 years, you know. Yeah, yes, exactly. Some people expressing, how to say, a kind of nostalgic, you know, feelings. Right. And first response from them are not very positive, frankly, some of them. But however, to speed up the process of transforming our company and of course profitability growth strategy, we need to show the evidence to the employees. I do believe they will change the mindset to a positive way. So that's why I have to show the result to the employee to make it everyone the positive way. We will speed up the process of the transform of ourselves to fit to the market at a global basis. So customers response are quite positive.

[A]

Over at Sony, CEO Hiroki Totoki has a similar goal of communication with employees as he continues his company's transformation. What you're describing is a very different Sony from what it was 20 years ago. How do you bring along Sony employees to this new world?

[B]

That's a great question. And you know, even the portfolio shift is the right thing from the investor's point of view. And real business has been done by the people. And if you look down to the ground, people are very committed to the current business and current job. And to shift that job and business domain is not really important. But as a CEO, most important thing is how to pathway with rationale this is the right thing we have to do. That kind of communication is quite important to the employee. We have to transform the entire Sony, otherwise we can survive. And sometimes the transformation is very severe. But we have to do that over

[A]

and above the experiences of individual Japanese company leaders and the experiences of Japanese workers. There's a larger cultural question whether the conservatism we've seen in Japanese markets and investors is imprinted or whether it has been the result of macroeconomic forces which have changed. Eiji Ueda of Apollo observed the back and forth between economics and culture during his years at, at Goldman Sachs and National Pension Fund GPIF. For 30 years or so, Japan has been perceived as sort of low risk, low return.

[D]

Yes.

[A]

As you say, cash is king.

[D]

Yeah.

[A]

And it's been thought maybe that's part of the Japanese culture. Is that not right, that Japanese are not inherently conservative?

[D]

I don't think so, because when I started in my career, GDP was growing, you know, high single digit and the 10 year yield was 6%. So I don't think this is the cultural things. People basically make irrational decisions with the macro environment because the cash is the best assets to own compared to the others. And now things are different. So I think if people make a irrational decision, economical, rational decisions, I think people are open for various ideas on the new finance space.

[C]

There's nothing like 3% inflation to get people to think differently. And we have our work cut out for us, as do some of the other large providers of private market investment opportunities. But this is about education. This is not about whether they will move. They are going to move. The Japanese institutions are moving. And so it's just a rate of change. And we're now we're seeing an inflection point in that rate of change spurred on by higher inflation.

[A]

That does it for us here on Wall Street Week. Coming to you from Tokyo, I'm David Westin. See you next week for more stories of capitalism. Sam.