Regional Q&A: Apollo in Japan with Tetsuji Okamoto and Noriaki Matsuo

Tetsuji Okamoto, Lead Partner for Japan, and Noriaki Matsuo, Head of Strategy for Japan, recently sat down for a Q&A to discuss the growing need for retirement income in Japan's aging society and how private market strategies can help investors weather periods of market volatility.

They also explore how private capital can offer flexible, tailored solutions to help Japanese companies navigate uncertainty, drive growth, and meet the evolving needs of the economy.

Apollo has long been committed to the Japanese market, with a growing team in Tokyo and capabilities across asset management and retirement services. Tetsuji Okamoto, Apollo’s Lead Partner for Japan, and Noriaki Matsuo, Head of Strategy for Japan, recently discussed their views on trends impacting the Japanese economic and retirement landscape, and the outlook for the private investment marketplace in the country.

Could you describe the growth Apollo Japan has experienced in recent years? How does Japan fit into Apollo’s overall strategy in Asia-Pacific?

Okamoto: Apollo Japan has grown significantly since we established a dedicated Tokyo office in 2019. On the investing side we have deployed over $7B across private equity, hybrid, and credit solutions, helping to meet the needs of Japanese companies and sponsors. Recently, we announced the $2.1 billion Panasonic Automotive System transaction with Panasonic Group in private equity, and our Global Principal Structured Finance team announced a $700 million capital solution for Sony Music, an affiliate of Sony Group Corporate, one of Japan’s leading global corporations.

We have also built strong distribution capabilities to help cater to the changing asset allocation priorities of local institutions and the investment and savings goals of Japanese individuals. In particular, we believe Japan is a natural fit for retirement services partnerships and the scaled reinsurance capabilities we offer via Athene, as well as our other individual retirement savings and Global Wealth products that can generate excess yield.

How have demographics and Japanese monetary policy shaped retirement needs in Japan?

Okamoto: Like many mature societies, Japan’s aging demographics are driving a massive need for retirement income. During the prior deflationary period and ultra-low rates, for many Japanese savers cash was justifiably king. For those willing to allocate elsewhere, Japanese public equity markets proved lucrative for a time. But with inflation now present and rates rising, individuals who are over-allocated to cash or underperforming public equities are rethinking their investment strategies, a trend that’s been further underlined by the recent sell off in Japanese public equities. In response, we believe we’ll see an acceleration of investors looking to replace significant swaths of their portfolios with private market products.

Matsuo: Japanese individuals, particularly those who are approaching or have reached retirement, urgently require access to high quality, steady fixed income. These assets, such as those Apollo can originate via private credit strategies, can help investors weather periods of volatility and potentially earn excess spread to public markets. We’ve observed increasing demand for private credit in Japan in recent years from both individuals and institutions.  

How is Apollo partnering with Japanese financial institutions, particularly in the realm of retirement solutions?

Matsuo: We’ve formed strong partnerships with Japanese banks, brokers and insurers that aim to align our expertise and innovative alternative investment products with the needs of these institutions and their clients. Through our partnerships, we offer innovative private asset products to a wide range of Japanese institutions, savers and retirees who previously did not have access to alternative investments. These products can help investors to both accumulate and preserve wealth, often with lower volatility than public market strategies.

We also have partnerships in reinsurance and asset management. Insurers increasingly turn to Apollo to access investment grade private credit, which we originate globally on behalf of our own insurance balance sheets. Private investment grade credit can provide long-dated, steady-yielding assets that are suitable match for retirement liabilities and ultimately help savers meet their financial return goals.

How are Japanese companies today thinking about private capital – whether equity, hybrid or credit – as they look to navigate uncertainty or propel growth?

Okamoto: Historically, Japanese corporates exclusively depended on large banks for scaled financing solutions. But as Japanese companies look to compete globally, there is a clear need for players like Apollo to provide flexible capital at scale across the capital structure, tailor-made for each specific situation, whether it be offense, defense, or transformative events. The speed and certainty that private capital can provide has made it an increasingly popular corporate financing source in Japan.

As Japanese companies continue to warm up to private markets, we expect to find opportunities to provide additional bespoke financings, for example via hybrid capital solutions, where we focus on underserved segments of the market between traditional debt and equity. Founders and management teams in Japan who are seeking to transform their businesses without relinquishing control or issuing dilutive equity are increasingly considering hybrid capital.

We also continue to see a large opportunity in Japan private equity, especially in areas where we have differentiated global sector experience and in situations that involve either high levels of deal complexity or strong coordination and alignment with partners. This tends to occur with corporate carve-outs. We have successfully conducted four such transactions in partnership with large, blue-chip Japanese conglomerates, where we saw an opportunity to create a win-win situation for both employees and customers while minimizing business disruption.

What is your outlook for the private capital solutions in Japan going forward?

Okamoto: I see tremendous opportunities for private investing here in Japan. Going forward, I expect Japanese companies to increasingly rely on private capital solutions as they seek to keep pace with global shifts such as the energy transition, which are highly capital intensive.  

At Apollo, we will maintain our focus on innovation as we seek to consistently provide differentiated private capital solutions to Japan. I firmly believe that the integrated asset management and retirement services platform we operate via Apollo and Athene is well positioned in Japan to provide such scaled solutions, so I am very excited about the opportunities in front of us.