Japan’s merger control regime faces a persistent issue: how to handle consolidation among domestic companies seeking to survive in a shrinking domestic market while enhancing their competitiveness to expand into overseas markets.
The Japanese economy is experiencing a rapid decline in its labor force due to population aging and declining birthrates, as well as a sharp contraction in domestic demand.
These challenges are long-term and unavoidable, and the country is also facing an urgent and immediate problem: increased exports from China of products manufactured using newly established excessive production capacity.
This has resulted in a significant impact on Japan, and securing natural and human resources has become increasingly difficult amid growing uncertainty in global politics and economies.
Achieving rationalization and efficiency through the restructuring of domestic industries and allocating limited human resources more efficiently has become an inevitable policy direction.
Many of Japan’s manufacturing plants are old, and production has continued by renovating these plants, but it is necessary to improve efficiency through consolidation.
Contraction in domestic demand is largely unavoidable, and Japanese companies are compelled to seek growth opportunities overseas, as seen in Nippon Steel Corporation’s acquisition of U.S. Steel in 2025.
In mature industries, companies exhausted by excessive competition in the domestic market often seek consolidation as a means of survival and strengthening their competitiveness to enter or protect overseas markets.
Recent examples include the integration of the polyolefin businesses of Prime Polymer and Sumitomo Chemical, which was finally unconditionally cleared in April 2026, and the merger between Hino Motors and Mitsubishi Fuso, which received conditional clearance in February 2026.
The Japan Fair Trade Commission (JFTC) has not dispelled its wariness toward the emergence of Japanese “champion” companies that can genuinely compete in global markets.
In industries facing shrinking domestic demand, companies often seek consolidation to survive and enhance global competitiveness, but aggregate market shares in the domestic market inevitably become high, and many transactions encounter difficulties early on.
This situation has persisted for a long time, and while global markets are often defined in certain sectors, domestic markets are still frequently defined in many manufacturing and service industries.
In Europe, there are signs of a shift from the previous stance, with the “Draghi Report” examining European competition policy from the perspective of strengthening the competitiveness of European industry.
Cross-border integrations intended to create large European companies capable of competing with global leaders have been viewed positively as a means of creating strong European companies and strengthening the resilience of the European economy through energy policy changes.
These developments may influence Japan’s approach to merger review, which is currently at a stage where it must decide what priorities to place at the forefront going forward.
The “Guidelines on the Application of the Antimonopoly Act to Activities of Businesses, etc. toward the Realization of a Green Society” suggest that mergers contributing to the realization of a green society may receive a certain degree of consideration.
The JFTC has also published a “Casebook on Economic Security and the Antimonopoly Act,” which presents past cases involving the integration of oligopolistic domestic operators or consolidation of businesses in shrinking markets.
However, this document merely compiles existing precedents and does not introduce anything fundamentally new, and the concept of economic security is aimed at protecting domestic supply chains and preventing technology leakage from a national security perspective.
There is a growing sense in Japan that “Japanese champions” capable of competing in global markets may be necessary, and protecting consumers in a shrinking domestic market could ultimately fail to serve the interests of the public.
Mergers and acquisitions have been increasing, and some recent cases have been approved through behavioral remedies without imposing structural remedies, even where market shares are high.
Examples include the integration of ductile iron pipe businesses by Kubota in 2025 and the integration of truck businesses between Hino Motors and Mitsubishi Fuso in 2026.
These trends may accelerate going forward, reflecting shifts in economic structure within society with a declining population and changes in the international environment, which could impact renewable energy targets and litigation funding regulation.
It is now up to the competition authority to decide what priorities it should place at the forefront going forward.
Slight signs of change can be observed in Japan’s approach to merger review.