IPOs Declining in Japan amid Slowdown in Tech Listings

Tokyo, Sept. 3 (Jiji Press)–The number of initial public offerings in Japan has been falling sharply, reflecting a slowing pace of new listings by software-related companies that have led IPO activity in the country. Companies are moving to postpone their IPOs amid financial market turmoil caused by the war in Iran, concerns that artificial intelligence could replace traditional software products and businesses, and rising interest rates. Seventeen companies went public on the Tokyo Stock Exchange’s mainstay Prime, Growth and Standard sections in the first half of the year, down about 30 pct from a year before, according to the TSE. Annual IPO activity has been lackluster since the number peaked at 123 in 2021, when fundraising conditions were favorable as countries eased monetary policies to combat the COVID-19 pandemic. IPOs have declined particularly sharply on the TSE’s Growth section for startups since 2025. The benchmark gauge for the section, the TSE Growth Market 250 Index, has trended lower since 2022, creating an unfavorable environment for IPOs. The decrease also reflects the TSE’s decision to require newly listed firms to reach a market capitalization of at least 10 billion yen within five years of their IPOs to stay on the Growth section, as part of its focus on encouraging startups to thrive after going public. The stricter listing maintenance criteria has prompted an increasing number of companies to shift to the Standard second-tier section. Earlier this year, stock markets worldwide were hit by the so-called Anthropic shock after the rise of the U.S. company’s AI services fueled concerns that AI would replace traditional software products and businesses. Combined with rising interest rates across the world stemming from the Iran war, the number of IPOs on the Growth section fell by 40 pct in the first half of the year from a year before to 11. SaaS, or software as a service, firms, which provide cloud-based software for enhancing operational efficiency, make up a certain share of companies going public on the Growth section “SaaS-related firms have been increasingly moving to postpone their IPOs,” Soichiro Saito of SMBC Nikko Securities Inc. said. Looking ahead, IPOs by companies expected to receive government support in areas including autonomous driving, space and semiconductors are seen as promising. Large-scale IPOs are still scheduled for later this year, such as Tier IV Inc., an autonomous driving system developer. Market players have strong interest in so-called deep tech-related companies that aim to resolve social issues through technological innovation. “Consultations about IPOs are not decreasing,” Saito said. END [Copyright The Jiji Press, Ltd.]