Energy & Infrastructure M&A 2025 Comparisons

Japan’s broader M&A market has been exceptionally strong in 2025, hitting a record in H1 and driving Asia’s rebound. That momentum has spilled into energy and infrastructure adjacencies, while pure renewables dealflow remains selective. Despite recent inflationary trends, changes in the financing market and the current wars in Ukraine and Gaza, Japan has seen continued steady growth in its energy and infrastructure M&A market.

Against a backdrop of an accelerating global trend toward decarbonisation, many developers and utility companies have been keen to develop or acquire renewable energy projects in Japan. In 2021, Japan’s biggest oil refiner, ENEOS Corporation, completed its historic acquisition of a major renewable developer, Japan Renewable Energy, from Goldman Sachs and GIC. The deal, valued at approximately JPY200 billion, marked a historic milestone and, since then, has been regarded as a benchmark for valuations in the Japanese energy market, with subsequent transactions maintaining relatively high valuations.

That said, it is also true that the recent inflationary trends, disruption in global supply chains and the extraordinarily weak yen have had some adverse effects on the development and operation of energy and infrastructure projects. Offshore wind auctions and corporate power purchase agreements (CPPAs) (whether under the Feed-in-Tariff (FIT)/Feed-In-Premium (FIP) subsidies or not)have continued to underpin project pipelines, but the recent cost-of-capital sensitivity and disruptions in the supply chain have made deal-making relatively more selective. Also, the recent surge in AI-driven demand has resulted in transition-enabling assets, such as battery energy storage systems (BESS), data centres and grid expansion, attracting deep pools of capital in Japan.

Japan has locked in the GX (green transformation) policy architecture. The Cabinet approved the GX 2040 Vision and the Seventh Strategic Energy Plan on 18 February 2025, framing simultaneous goals of energy security, growth and decarbonisation. Also, carbon pricing got teeth: the voluntary GX-ETS (Emissions Trading Scheme) moves to a mandatory ETS from FY 2026 and a fossil-fuel levy (GX surcharge) starts in FY 2028, which will be a clearer price signal for long-life assets and industrials. Deal models now explicitly price the GX-ETS pathway (compliance exposure from FY 2026, levy from FY 2028) in mid-/late-life cash flows and capex plans.

Japan has advanced transition finance alongside sovereign Climate Transition Bonds, giving public sector ballast and a template for private funding structures. Lenders increasingly require credible, Paris-aligned transition plans to unlock pricing and size.

Some market participants have been concerned about the potential adverse impact by the recent policy changes in the US, but, so far, the Japanese government has never changed its policy goals toward decarbonisation by 2050, and investor engagement with energy and infrastructure projects has remained steady and firm. If US risk/return worsens due to its policy uncertainties (such as Inflation Reduction Act (IRA) funding pauses or cancellations), some part of the global pool of capital may rotate toward Japan where its GX policy is crystallising and supporting steady deal volumes.

Different types of investors are taking different approaches to access the energy and infrastructure M&A market in Japan.

Independent Energy Developers

Since the introduction of the Feed-in-Tariff subsidy programme back in 2012, a large number of independent energy developers have emerged. Typically, these have developed and constructed renewable energy assets on a greenfield basis with project finance from commercial banks.

Japanese Strategic Investors

Typically, strategic investors (such as general trading houses (sogo shosha), power and gas utility groups, oil refiners and real estate developers) have invested in renewable and battery storage assets on a greenfield and/or brownfield basis. They often acquire a portfolio of operational and/or pipeline assets from developers or sometimes even acquire the whole business of such developers to “buy time with money” for the purpose of their strategic goals to change their existing business models in a more sustainable direction.

Global Infra/PE Platforms

Major global infra/PE platforms (including those based in US, Australia and Singapore) are raising Asia-focused infra funds with Japan as a priority – particularly for renewables, data centres and transition adjacencies. They typically acquire a portfolio of operational and/or pipeline assets from developers.

Banks and Institutional Investors

Commercial banks, including Japanese megabanks such as MUFG, Mizuho and SMBC, are dominant in lead arranger position for project financing in energy and infrastructure projects in Japan. Also, life insurers and pension funds are deepening transition finance and project-loan exposure. The use of project bonds (including the repackaging of project loans to trust beneficial interests) is not particularly common or popular in Japan.

Listed Infrastructure Funds (Tokyo Stock Exchange Infra Fund Market)

A small but active market of listed funds (historically solar-heavy) provides a take-out or recycling route for operating assets (now testing storage add-ons, FIP transitions and wind farms).

In its Seventh Strategic Energy Plan (published in 2025), Japan targets a 2040 power generation mix of 40–50% renewables, 30–40% thermal (fossil and low-carbon variants), and about 20% nuclear. In practice, renewables account for about 25%–30% of Japan’s generation mix, with thermal (LNG, coal) still dominant. For 2030, the policy targets renewables making up about 36–38% of power supply. By 2040, renewables are expected to be the main power source for Japan.

The main types and sizes of currently planned (major) energy or infrastructure projects are as follows.

Renewables (Other Than Offshore Wind)

Many developers and investors are developing renewable energy projects based on the fixed-price offtake guarantee under the FIT scheme or corporate PPAs with or without the FIP subsidy. The size of solar, biomass and onshore wind projects could significantly vary from several MW up to several hundred MW, but suitable onshore sites for large-scale development on a greenfield basis have been rapidly decreasing in Japan.

Offshore Wind

Offshore wind has been considered by investors to be the last frontier of large-scale development of renewable energy in Japan. Also, the Japanese government is expecting that offshore wind will play a vital role in the process of making renewable energy the main power source in Japan toward 2030 and 2040. The size of an offshore wind project could range from several hundred MW to even a GW class. Thus, large developers and investors have been very keen to develop large-scale offshore wind projects in recent years. However, many developers and investors are currently struggling with headwinds, including the overly competitive bidding process, rising capex and disruption in supply chains.

BESS (Battery Energy Storage Systems)

Since the introduction of the Long-Term Decarbonized Power Auction (LTDA), there has been a surge in BESS projects set up by renewable developers and investors. Foreign developers and investors, in particular, have been very active in this space, leveraging their advanced know-how and experience in other markets. The size of BESS projects is typically less than 100 MW per project so far.

Hydrogen and Amonia

The Japanese government enacted the Hydrogen Society Promotion Act (”the Hydrogen Act”) in late 2024. One of the subsidy schemes under the Hydrogen Act is a supply-side subsidy structured on the basis of a Contract for Differences (CfD) mechanism, providing financial support for the price gap between the sourcing of low-carbon hydrogen/ammonia as compared to conventional fuels such as LNG and coal. Through this subsidy programme, the Japanese government intends to select attractive hydrogen and ammonia projects which are considered to contribute enough to the development and expansion of new supply chains in Japan toward 2030 and thereafter. In this context, a growing number of hydrogen and ammonia projects can be expected in the near future. The size of these projects could significantly vary from several MW up to several hundred MW.

Conventional Thermal Power Plants

In recent years, projects to build new conventional thermal power plants fuelled by LNG or coal have been scarce, but there have been a number of projects to convert existing thermal power plants that will co-fire with hydrogen or ammonia or to newly build thermal power plants purely fuelled by hydrogen or ammonia. Also, we have seen a number of CCUS projects subject to a new subsidy programme established by the Japanese government.

Establishing a New Company

The two most common types of business entities chosen by entrepreneurs establishing a business in Japan are the kabushiki kaisha (KK) and the godo kaisha (GK). The KK and the GK are commonly used because of the limited liability protection they provide to all of their shareholders and members. The KK is similar to a corporation in the US and is the most traditional type of business entity. The GK was introduced in 2006 under the Companies Act, modelled on overseas limited liability companies. While it is common to choose a GK as a special purpose company (SPC) for project development and financing, entrepreneurs choose the KK to develop a new start-up business because only the shares of a KK (and not membership interests of a GK) can be publicly traded on a Japanese stock exchange, and a KK is suitable for raising outside capital from multiple investors. An investment limited partnership, a vehicle used by many venture capitalists in Japan, cannot invest in a GK under law.

For a KK, it typically takes at least one to two weeks to prepare documents for incorporation, notarise the articles of incorporation, and make an application for commercial registration. For a GK, the time required may be shortened by a few days because notarisation of the articles of incorporation is not required. If the initial promoter, director or member is a foreign company or individual, there may be additional time required to prepare and gather necessary documents. The commercial registration usually takes less than one week to complete from the day of the application, and the day when the application was initially accepted by the local Legal Affairs Bureau retroactively becomes the day of incorporation. A KK must have at least JPY1 of initial capital.

Early-Stage Financing

Providers of early-stage financing to a start-up company include local venture capital firms, such as incubators and seed accelerators, and angel investors. Start-up companies may also seek early-stage financing through loans from government-sponsored financial institutions (such as the Japan Finance Corporation). Crowdfunding is not the main source of early-stage financing but is also available in Japan.

Providers of early-stage financing typically have their own template documentation for financing, but angel investors sometimes invest in common shares without formal documentation to save administrative burden and costs. Early-stage financing is typically made through common shares or preferred shares, or convertible bonds or equity. Convertible equity in Japan uses an equity instrument called share acquisition rights, and there is a well-known seed-round convertible equity instrument called J-KISS, created by Coral Capital.

Liquidity Events

Historically, founders of start-up companies preferred IPOs, and the prevalent liquidity event was to take the company public. According to a report published by METI, approximately 70% of exits between 2017 and 2019 were made through IPOs. However, we have seen a growing trend of exits through M&A transactions. The Japanese government is actively working to facilitate M&A sales for start-up companies. For example, in 2023, the government expanded the existing tax incentive for companies that invest in start-ups to cover M&A deals. Companies that acquire more than half of the voting shares of start-up companies can, subject to certain conditions, deduct 25% of the acquisition cost from their taxable income.

A dual-track process is not prevalent among Japanese start-up companies yet due to limited M&A opportunities as compared to the US, but could be considered by start-up companies where M&A is a viable option. For example, Paidy Inc., a Japanese online deferred payment service provider, underwent a dual-track process, and was eventually acquired by PayPal Holdings, Inc.

IPO: Choice of Listing

In respect of IPOs, most companies are likely to pursue a listing on a Japanese stock exchange if their main business is conducted in Japan. However, recently, some – but still a small number of – Japanese companies have pursued a listing on the NASDAQ. These include MEDIROM Healthcare Technologies in the healthcare sector and TOYO Co., Ltd., a manufacturer of solar power panels. One of the reasons is that the NASDAQ’s listing standard requires less time to prepare for an IPO (around 18 months), whereas companies must prepare for at least three years in order to conduct an IPO on a Japanese stock exchange.

Sale: Transaction Structure

A typical transaction structure for an M&A exit would be a share sale and purchase. As the major shareholders usually have drag-along rights, this structure is selected even if the company has a number of VC investors.

While the acquisition could be implemented through statutory corporate reorganisation procedures such as a merger or share exchange (ie, a statutory procedure in which a company acquires 100% of the shares in another company), they are not widely used. One of the reasons may be because the Companies Act requires certain statutory creditor protection procedures as well as disclosures, and a merger or share exchange agreement is not as flexible as a share purchase agreement. There may also be negative tax consequences for the target company if the merger or share exchange does not qualify as a tax-qualified merger or share exchange.

The current trend is to sell the entire company rather than to sell only a controlling interest.

Because many acquirers are strategic buyers, they prefer to acquire 100% of the company; however, in some cases, key management and employees may be eligible to own equity in the company after the transaction.

Spin-offs and carve-out transactions are becoming increasingly common as options in the energy and infrastructure space in Japan. In recent years, many developers have been keen to pursue and maximise the scale of development as well as synergies between two or more different partners who can bring together different capabilities and resources in this challenging market environment with both high potential and risks. In this context, it is becoming popular for major developers and investors to transfer a part of their businesses into a separate company and form a joint venture or platform with another partner(s) in order to further expand and diversify their investment in energy and infrastructure assets.

In the case of tax-qualified spin-offs, taxation on the dividend (or deemed dividend) at the divesting company’s shareholder level will not apply, and the capital gains tax at the divesting company level will be deferred.

The specific requirements for tax-qualified spin-offs depend on the structure of the spin-off, but for spin-offs where the divesting company will not hold any shares in the spun-off company, the main requirements are generally as follows.

• Shareholders of the divesting company must only receive shares issued by the spun-off company.
• No single party may hold more than 50% of the divesting company before the spin-off, nor is any party expected to hold more than 50% of the spun-off company afterwards.
• The spun-off company’s operations must remain unchanged after the spin-off in terms of assets, directors, and employees.

In addition, to facilitate business carve-outs through spin-offs, the 2023 tax reform introduced provisions for partial spin-offs (where the divesting company retains some ownership in the spun-off company). Under certain requirements, taxation on the dividend (or deemed dividend) at shareholder level will not apply, and the capital gains tax at the divesting company level will be deferred.

It would be technically possible to conduct a spin-off immediately followed by a business combination. However, in order for spin-offs where the divesting company will not hold any shares in the spun-off company to qualify as a tax-qualified spin-off, no person may own 50% or more of the spin-off company after the transaction. Therefore, for example, if the spun-off company is acquired by a third party immediately after the spin-off, and this acquisition was planned at the time of the spin-off, the spin-off is not considered a tax-qualified spin-off.

There is no typical timing for a spin-off. The parties are not required to obtain a ruling from a tax authority prior to completing a spin-off. However, if the divesting company is publicly listed, the spun-off company’s shares would generally be listed to ensure shareholder liquidity. In such cases, the entire process, including the preparation period for the IPO of the spun-off company’s shares, may take more than two years to complete.

It is not common to acquire a stake in a public company in Japan prior to making an offer. However, buyers sometimes acquire a stake in a target in order to make a shareholder proposal to the target and exercise other shareholder rights.

The Financial Instrument and Exchange Act of Japan (FIEA) imposes a reporting requirement on holders of more than 5% of the shares of a listed Japanese company. The reporting must be made to the relevant local finance bureau (zaimu-kyoku) within five business days of the 5% threshold being exceeded. Following the initial reporting, the shareholder must file an amendment whenever there is an increase or decrease in its shareholding ratio by 1% or more, or a change to the name, address or other material information in the previous reporting.

In addition, if a foreign investor acquires 1% or more of the total issued shares of a listed company in Japan, the Foreign Exchange and Foreign Trade Act (FEFTA) apply to the transaction. The foreign investor is required to submit a prior notification to the relevant authority and obtain approval before the transaction is completed.

Buyers need to state the purpose of the acquisition and the buyer’s plan regarding the company on the large shareholding report and the prior notification under the FEFTA.

There is no “put up or shut up” requirement under Japanese law.

In May 2024, the Diet passed amendments to the mandatory tender offer rules. The mandatory tender offer requirement will extend to any market trades (on-floor transactions), which are currently exempt. In addition, the threshold for triggering a mandatory tender offer will be reduced from the current one-third to 30%. These amendments will come into effect on 1 May 2026.

The most common structure for an acquisition of a public company is a two-step transaction consisting of a tender offer, followed by a squeeze-out. A one-step merger is not common, as it would necessitate a revaluation of the transferred assets for tax purposes, resulting in taxable income being recognised based on the difference between the book value and the fair value.

Cash transactions are typical in the energy and infrastructure industry. Cash can be used as consideration in not only tender offers but also merger transactions. There is not a minimum price requirement for a takeover/business combination.

Offer conditions are strictly regulated, with the FIEA setting out the limited list of permitted conditions. Financing cannot be an offer condition.

In a friendly deal, although not very common, it would be possible to enter into an agreement with the target company which contains interim covenants, addressing issues identified during due diligence, and obligation to cooperate for obtaining necessary governmental approval and financing.

Tender offerors can set a minimum threshold, which is usually set at two-thirds in a 100% acquisition to ensure the approval of a special resolution at a shareholders’ meeting that is required to finalise the squeeze-out following the tender offer.

If an offeror acquires 90% or more of a listed company’s voting rights, they can use a statutory call option under the Companies Act to squeeze out minority shareholders. This requires board approval, which the 90% shareholder can control, but not shareholder approval.

If the offeror secures at least two-thirds of the voting rights but less than 90%, they can still squeeze out minority shareholders through methods requiring a two-thirds super-majority shareholder approval. Common methods include a short-form cash merger or a reverse stock split (kabushiki heigou), with the latter being more prevalent. In a reverse stock split, minority shareholders would end up with fractional shares, which would then be cashed out.

The offeror must submit equity and debt commitment letters to the regulator as evidence of financing, which will be publicly disclosed together with the registration statement at the commencement of the tender offer. Financing cannot be an offer condition.

A target company may agree to certain deal protection measures such as break-up fees, no-talk and no-shop provisions, and a matching right upon thorough negotiations.

In cases where a target remains listed after a tender offer, the tender offeror and the target sometimes enter into an agreement regarding the target’s governance. To the extent permitted by applicable laws and regulations, this agreement may allow the tender offeror to dispatch directors to the target and grant the tender offeror certain veto rights (such as matters requiring prior approval by the tender offeror).

Typically, an offeror will enter into a tender offer agreement with the principal shareholder when announcing the tender offer. The irrevocable commitment under the tender offer agreement is considered a contractual obligation.

Depending on the cases, it is relatively common for an out clause to be stipulated under the tender offer agreement.

The FIEA requires that a party launching a tender offer submit a tender offer registration statement (koukai kaitsuke todokede-sho, or TORS) and relevant documents to the Kanto Local Finance Bureau (KLFB). Although the FIEA does not expressly require the bidder to obtain approval from the KLFB before commencing a tender offer, it is standard practice to consult with the KLFB, have the TORS reviewed by it, and obtain a sign-off of the KLFB before commencing a tender offer. Although it is usually the KLFB with which bidders directly communicate, the Financial Services Agency (FSA) works together with the KLFB (often behind the scenes) and is also involved in the pre-consultation process.

Under the FIEA, the tender offer period can be set between 20 to 60 business days. The tender offer period would typically be 30 business days (although the statutory minimum is 20 business days, it is customary to open the tender offer for 30 days for take-private transactions).

An extension of the preceding tender offer period is possible. For example, if the price is changed within ten business days before the end of the tender offer period, the FIEA requires the submission of an amended registration statement and an extension of the tender offer period.

The tender offeror can extend the tender offer period up to 60 business days if regulatory/antitrust approvals will not likely be obtained prior to the end of the tender offer period.

If obtaining antitrust clearance is expected to take a significant amount of time, a pre-announcement type of tender offer is typically used. In cases where the clearance process is expected to be short and procedural, it is common to obtain the clearance after the tender offer has commenced.

In Japan, acquisitions of privately held companies are most commonly carried out through share purchases. However, if the buyer wishes to acquire only a specific part of the target’s business or to avoid taking on potential liabilities, an asset sale may be preferred. In such cases, the transaction is structured as an asset sale rather than a share purchase.

An asset sale is generally implemented either through a simple transfer of assets or by way of a statutory company split (kaisha bunkatsu) pursuant to the Companies Act. In both approaches, the specific assets to be transferred and liabilities to be assumed can be clearly designated, and both methods are equally effective in isolating liabilities.

Business in the electricity sphere in Japan is regulated depending on its type of business, and the business is roughly divided into three categories: (i) power generation; (ii) power transmission and distribution; and (iii) retail.

• Power generation is regulated through a filing system, meaning that businesses can operate as long as the necessary information is filed.
• Power transmission and distribution are regulated by a licensing system and are operated as regional monopolies, with Japan divided into ten regions.
• Retail is regulated as a registered business, allowing operations to commence once the required information is submitted and the business is officially registered.

The gas industry is similarly regulated, as follows.

• Gas production is subject to filing.
• Gas pipeline operations require a license.
• Gas retail requires business registration.

In addition, specific permits and licenses are required for energy power generation. In particular, to participate in the FIT and FIP programmes, a business plan must be certified by the Minister of Economy, Trade and Industry. Certification is granted once the necessary information is submitted, provided the power generation project meets certain criteria. However, for certain projects, such as large-scale solar power generation, a bidding process is required, and the project must pass this process.

The Financial Services Agency (FSA) administers securities regulations under the Japanese securities regulations (the Financial Instruments and Exchange Act), including regulations involving tender offers, public offerings and proxy solicitations.

The Ministry of Finance (MOF), the Ministry of Economy, Trade and Industry (METI), and other relevant ministries regulate cross-border transactions under the Foreign Exchange and Foreign Trade Act (FEFTA), including inward/outward investments.

Tokyo Stock Exchange, Inc (TSE) and other stock exchanges oversee transactions involving a listed company.

In Japan, there are generally no restrictions on foreign companies investing in Japanese companies or establishing Japanese subsidiaries within the country, with the exception of certain specific limitations on foreign investment under laws such as the Civil Aeronautics Act, Radio Act, or Broadcasting Act. However, the Foreign Exchange and Foreign Trade Act (FEFTA) does impose certain regulations.

The FEFTA requires prior notification for “inward direct investments” by foreign investors in certain circumstances. The definition of “inward direct investments” includes activities such as acquiring shares, setting up a new company, or lending money under specific conditions. This requirement applies if a Japanese company or its subsidiary is involved, or plans to be involved, in a business that falls within a “designated industry”. Investors must submit an advance notification to the Minister of Finance and the minister responsible for the relevant industry through the Bank of Japan. This notification must be made within six months prior to the planned investment date.

Once the notification is submitted, the proposed investment or related activities cannot proceed until 30 days have passed from the date of notification. This 30-day waiting period can be shortened if the investment is assessed and found not to pose any significant issues.

It is important to note that industries such as electricity and gas are categorised as designated industries. Therefore, when considering investments in energy sectors in Japan, it is necessary to check whether the investment falls under the definition of inward direct investment and if the target company operates within a designated industry.

In addition to the foreign investment restrictions mentioned in 7.3 Restrictions on Foreign Investments, the FEFTA also regulates export control. The FEFTA requires prior approval by the METI for the export of certain cargos and technologies with a potential for military application listed in the relevant government ordinances. The exporter should be careful about whether the subject product triggers a prior approval because the list also includes items that do not apparently seem to be related to weapons or defence industry depending on its specification. Also, the FEFTA has a catch-all regulation that allows cargos and technologies not specifically listed under the FEFTA to be subject to approval by the METI if it is highly likely that they are used to develop or manufacture weapons.

Under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (AMA), the parties must file a notification to the Japan Fair Trade Commission (JFTC) and obtain the clearance prior to the closing for certain M&A transactions. The thresholds for the filing requirement are different according to the types of transaction structures, but in the case of an acquisition of shares, an acquisition of more than 20% or 50% of the target’s voting rights will trigger the prior notification obligation if an acquirer group has aggregated domestic sales of more than JPY20 billion and a target company group has aggregated domestic sales of more than JPY5 billion. If JFTC finds no issues from the competition law perspective, it will give a clearance notice during the 30-day waiting period. If it requires a more detailed review, a second-phase review will commence. The maximum period for the second-phase review is either (i) 120 days or (ii) 90 days from the completion of the submission of all additional materials requested by the JFTC, whichever is the longest.

In May 2023, JFTC published “Guidelines concerning the Activities of Enterprises toward the Realization of a Green Society under the AMA”, which is based on the concept that the corporate activities toward the realisation of a green society are unlikely to pose issues under the competition law in many cases. In terms of the antitrust filing, these guidelines show supposed cases involving M&As or business alliances regarding businesses aiming at reduction of greenhouse gas as examples not causing substantial issues from the competition law viewpoint even if such transactions do not meet the safe harbour criteria that are used in the review process by JFTC. As a part of JFTC’s continuous review, in 2024, JFTC revised these guidelines to further clarify the application of competition law to corporate initiatives for decarbonisation. The amendments include: (i) more detailed guidance on collaborative activities, such as joint disposal of facilities and joint procurement; (ii) the methods for measuring and evaluating the effects of decarbonisation; and (iii) new illustrative examples and explanations that reflect the practical needs of businesses, aiming to provide more concrete support for companies seeking to engage in environmentally friendly collaborations.

Doctrine of Anti Abuse of Employee Dismissal

Under Japanese labour law, an employer may not dismiss its employees unless there is an objectively reasonable ground and the dismissal is considered appropriate in general societal terms. Whether the dismissal is valid depends on concrete circumstances in each individual case, but a purchaser should note that employee dismissals are generally difficult in Japan and employee dismissals upon M&A transactions may be invalid under this doctrine.

Labour Union

Although there is no legal system equivalent to the works council in Japan, employees of a company may form a labour union. If a labour union has executed a collective agreement with the company, the purchaser should examine whether the union has a pre-consultation right or any other provisions that may affect the successful implementation of the contemplated transaction.

Company Split and Labour Contracts Succession Act

In a company split transaction, the contracts, including employment contracts, specified in the company split agreement will be automatically transferred to the succeeding company under the operation of law without the counterparties’ individual consent. However, even if the parties agree to transfer the employment contracts of employees who mainly engage in the businesses that will remain in the split company after the company split, such employees may object to the transfer of their contracts in the company split to stay their status as employees in the split company. The Labor Contracts Succession Act of Japan requires a split company to explain certain details of the company split and make notification to its employees regarding such objection procedure.

There is no requirement for approval by a central bank (other than payment reporting which is normally handled by banks) that applies to M&A transactions. As discussed in 7.3 Restrictions on Foreign Investments, there is a requirement for pre-transaction and post-transaction reporting in relation to foreign investment that needs to be made via the Bank of Japan.

Given that many renewable power plants (especially solar power plants) were rapidly developed all over Japan by numerous developers, we have seen more and more cases where developers have failed to comply with relevant regulations or have caused a material adverse impact on the local environment.

To ensure better engagement with local stakeholders, developers are now required to take effective measures to give advance notice to local residents about their plan to develop renewable power plants. In particular, as of 1 April 2024, developers of renewable power plants sized over a certain threshold subject to the government subsidy (the FIT or FIP programme) have been required to hold a briefing session to explain the comprehensive parametres of the projects to local residents living within a certain distance of the project site. This requirement also applies to the timing of acquisition/M&A transactions on such projects and even to any change of control affecting developers setting up or operating the projects. It will therefore have a material impact on M&A practice in the sector.

Japan’s energy market is undergoing a pivotal transformation. Following the government’s pledge in 2020 to achieve carbon neutrality by 2050 and cut greenhouse gas (GHG) emissions by 46% by 2030, the Seventh Strategic Energy Plan (February 2025) emphasises maximising the use of renewable energy and nuclear power. Together, these sources are targeted to provide up to 70% of Japan’s electricity by FY 2040. The government also adopted the GX2040 Vision, which integrates a package of economic policies to achieve the best balance of decarbonisation, energy security and economic growth.

Reform of Renewable Energy Framework

Since 2012, the FIT scheme stimulated solar power development but imposed heavy costs on the public (about JPY4.8 trillion annually by 2025). To alleviate this public burden, Japan introduced the FIP scheme in 2022 under the new FIT/FIP Act. Unlike FIT’s guaranteed prices, FIP incentivises developers to sell electricity at market rates (or negotiated CPPA prices), with a subsidy covering the gap between a “strike price” and market averages. While designed to reduce the public burden, the shift creates uncertainties for developers, particularly in large-scale solar and wind projects. The Act also introduced automatic cancellation rules for non-operational projects (which have failed to achieve the commercial operation by a certain longstop date) in order to free up grid capacity.

Offshore Wind Development

Offshore wind is critical to Japan’s renewable mix. Large-scale projects are advancing, such as those in Akita, Hokkaido and Kyushu, with targets of 10 GW by 2030 and 30–45 GW by 2040. Legal frameworks – the Port Act and the Marine Renewable Energy Act – enable long-term marine-area use and competitive bidding. A proposed amendment would extend permitting to Japan’s Exclusive Economic Zone (EEZ). Government support also includes infrastructure investment, streamlining of environmental impact assessment, and funding for floating wind technologies. Rising costs due to inflation and currency shifts (a weak yen) remain challenges, although investor interest remains fairly strong.

Corporate PPAs

Corporate power purchase agreements (CPPAs) are rapidly expanding, driven by regulatory reforms, environmental commitments (eg, RE100), and rising electricity prices. The government supports a wider use of CPPAs through various subsidies and clearer legal frameworks.

GX Policy: Decarbonisation Tools

The Green Transformation (GX) Promotion Act (2024) advances carbon pricing, with emissions trading to launch in 2026 and fossil fuel levies by 2028. A voluntary GX League already pilots trading. GX transition bonds fund major investments in hydrogen and ammonia projects, which are prioritised under the revised Hydrogen Basic Strategy, with support through CfDs and subsidy grants for supply-chain infrastructure. Japan also enacted the CCS Business Act (2024), creating a framework for carbon capture and storage, aiming for 120-240 million tonnes of annual storage by 2050. Finally, the newly introduced Long-Term Decarbonized Power Auctions (since 2024) support power plant projects fuelled by hydrogen, LNG, nuclear, renewables, and battery storage with a guaranteed 20-year subsidy to cover total capex.

Japan is restructuring its power sector through market reforms, stricter compliance, community engagement, and technology promotion. By combining renewables, nuclear, hydrogen, ammonia, carbon pricing and CCS, the country seeks a resilient, low-carbon electricity system aligned with global climate goals.

In an amicable transaction, a public company may disclose any information in the due diligence process given that the company has executed an NDA with the bidders. However, if a bidder has obtained any non-public material information, in principle, the bidder may not purchase the shares of the target company unless the company officially makes public such information in advance under the insider trading regulations in Japan. The Fair Disclosure Rule under the FIEA will not apply if the purchaser and the target company have executed an NDA which restricts the purchaser from selling or purchasing the shares of the target company.

A target company does not necessarily have to disclose the same information to all bidders, but limiting the scope of due diligence only against certain bidders (eg, a hostile bidder making a bona fide offer) without any reasonable ground may cause the risk of the violation of fiduciary duty of the directors depending on the circumstances. In addition, from a competition law perspective, it is common for a target company to share certain sensitive information only with a “clean team” of bidders who are not in charge of the business operation and such arrangement helps to avoid the risk of gun-jumping regulations.

Under the Personal Information Protection Act of Japan, personal information cannot be transferred to a third party without the consent of the subject individual. However, when a business is succeeded through mergers, company splits, business transfers, etc, and personal data related to such transferred business is provided to a third party, the recipient of such data is not considered a third party to whom the provision of personal information is prohibited.

In practice, it is often necessary to provide materials that include personal data (such as employee lists and key customer information) upon the request by the purchaser in the due diligence process. In such cases, it is interpreted that the target company may provide personal data pursuant to the exemption above, provided that the purchaser and the target company execute a confidentiality agreement.

Other than the above, there is no legal or regulatory restriction that would particularly limit due diligence of an energy and infrastructure company.

In launching a tender offer bid, the acquirer must file a tender offer registration statement with a local financial bureau, which will be publicly available online and make a certain press release.

Even if a listed company receives a bid proposal from a potential acquirer, there is no legal requirement for the potential acquirer or the target company to disclose the fact regarding such proposal. In the event that the information about such bid proposal is leaked or made public by the potential acquirer, the target company will likely need to make a concise announcement as to whether it is true that the bid proposal was made and the company is considering such offer, taking into account the status of its consideration. Under the insider trading regulation, if a potential bidder recognises the fact that another third-party entity has decided to commence certain accumulation of shares, such potential bidder cannot launch a tender offer unless the fact of such third party’s decision has been publicly disclosed. Hence, the tender offeror needs to disclose in its tender offer registration statement the information on the other entity’s bid offer if there is a non-public competitive bid offer from another entity.

In the case of a stock-for-stock M&A where the acquirer’s shares are issued as consideration, the acquirer must file a securities registration statement (or a securities notification if the value of the issued shares is less than JPY100 million). The waiting period for the securities registration statement is, in principle, 15 days after filing. If the target company is a listed company on the Tokyo Stock Exchange, the shares provided as consideration will be distributed to the shareholders of such listed company, which will require a technical listing for the shares to become listed. In this case, a preliminary review by the TSE is necessary prior to the issuance of the shares. Additionally, the acquirer will be subject to the continuous disclosure obligation, such as annual securities reports, under the FIEA and the TSE listing regulations. However, as we have ever seen few precedents of a stock-for-stock M&A in which a foreign company issues its shares to be listed on the TSE, the feasibility of such transaction scheme will need to be carefully examined.

When conducting a statutory corporate reorganisation (eg, a merger), the parties must prepare certain pre-closing disclosure documents to provide information to their stakeholders, such as shareholders and creditors. These pre-closing disclosures must include the financial statements of the parties. However, a foreign corporation cannot be party to a statutory corporate reorganisation but may issue its shares as consideration in certain transactions, such as a triangular merger. In the case of the acquisition of the business or shares of a non-listed company without statutory corporate reorganisation activities, there is generally no requirement for public disclosure of the acquirer’s financial statements.

When acquiring shares of a listed company, regardless of whether the consideration is cash or shares, the acquiring company must disclose its financial statements in the tender offer registration statement. If the tender offeror is a foreign company, these financial statements do not need to be prepared in accordance with IFRS or Japanese GAAP but can be prepared in accordance with the GAAP of its own jurisdiction, provided that the differences in such accounting principles are explained. If the acquirer is a newly established special purpose company (SPC) created for the tender offer, it may not have finished its first fiscal year, in which case the financial statements do not need to be disclosed in the registration statement.

Under the Companies Act of Japan, a statutory organisational restructuring generally requires the approval of the statutory agreement or plan at a shareholders’ meeting and prior disclosure of the information as to such transaction including the contents of the statutory agreement or plan. In practice, a separate definitive agreement is often executed as well as a simple-form statutory agreement or plan. However, it is not common practice to disclose the entire contents of such separate definitive agreements.

In the case of share acquisitions through a tender offer, a summary of the key terms of material agreements relating to the transaction must be disclosed. For provisions that are critical to shareholders’ decisions (such as conditions precedent to the transaction, fiduciary-out clauses and other deal protection provisions), the local financial bureau requests a certain level of disclosure.

Under the Companies Act of Japan, directors have a duty of care and a duty of loyalty to the company. When directors make a business judgement, the court will not find a violation of the duty of care as long as (i) there are no unreasonable errors due to negligence in the process of recognising relevant facts that form the basis of their decisions and (ii) the reasoning process and the contents of the decision-making based on those facts are not significantly unreasonable. This rule is called the “business judgement rule”, which is generally applicable to decisions in relation to M&A transactions.

In the Fair M&A Guidelines provided by METI in 2019, it is recommended to establish a special committee to ensure the fairness of transactions that involve structural conflicts of interest, such as MBOs and acquisitions of subsidiary companies by controlling shareholders. In practice, it is common to set up an independent special committee for such types of transactions.

For other M&A transactions, the necessity of a special committee should be considered on a case-by-case basis, depending on factors such as the degree of conflict of interest, the need to supplement the independence of the board of directors, and the high necessity of providing explanations to the market. For example, in cases where the fairness of transaction terms is critical to shareholder interests, such as cash-out proposals, or when considering the adoption of defensive measures against a hostile bidder, it is understood that the establishment of a special committee is meaningful.

The board of directors is expected not only to express their opinion regarding an acquisition proposal but also to actively engage in negotiations to ensure the shareholders’ interests. To maintain the board’s independence from the acquirer, a special committee may be established. Negotiations can be conducted by the board of directors/management based on recommendations from the special committee while, in some cases, the special committee is granted authority to directly negotiate with the potential bidder.

In the event of a going private transaction through a tender offer or statutory corporate reorganisation, shareholders who oppose the purchase price can exercise their appraisal right and file a petition with the court for a payment of fair price. For transactions between independent third parties, the court generally supports the agreed purchase price as fair value. On the other hand, for transactions involving structural conflicts of interest, such as MBOs and acquisitions of subsidiary companies by controlling shareholders, the court will examine whether measures to ensure fairness were exerted. If the court finds such measures not taken, it will determine a fair price.

It is practically common for the target company to retain its financial adviser (FA) and legal adviser (LA). If a special committee is established, the committee may also use its own FA and LA. In transactions involving a conflict-of-interest issue, it is not rare to obtain a fairness opinion from an independent third-party valuation firm. However, unlike in some other jurisdictions, Japan does not have statutory regulations governing the issuers or issuance processes of fairness opinions. Also, it would be difficult to say that there is a well-established common understanding regarding the definition of “fairness” in fairness opinions or the procedures that should be followed in their issuance. As a result, further legal developments are needed to allow stakeholders of a target company to pursue remedies against third-party valuation firms that issue inappropriate fairness opinions.