Apollo Sees Japan as Private Markets Gateway to Asia

In Brief: Japan's private markets are experiencing a fundamental transformation as the country abandons three decades of zero-rate financing, creating what Apollo's leadership sees as the most significant opportunity for alternative capital in the region. Matthew Michelini, Partner and Head of Asia Pacific at Apollo Global Management, warns that Japanese companies face their first major cost structure shock in 30 years, forcing them to abandon traditional bank relationships and embrace private credit, buyouts, and specialized financing solutions.

Speaking with Bloomberg anchor Sonali Basak, Michelini argued that structural reforms by Japan's trade ministry and stock exchange, combined with rising inflation and labor costs, are unleashing a wave of private market activity that could reshape how capital flows across Asia. His analysis suggests Japan's shift represents a blueprint for how mature economies transition from government-directed financing to market-driven private capital allocation.

Big Picture Drivers:

• Zero-Rate Exit: Japan's move away from decades of free money is forcing companies to optimize capital structures through private markets

• Regulatory Catalyst: Government reforms are creating shareholder-friendly policies that unlock private equity, credit, and activist opportunities

• Duration Mismatch: Traditional banks offer three-year loans while companies need 10-30 year project financing, creating private credit demand

• Wealth Reallocation: Aging demographics are transferring $7 trillion in savings toward investment products suited for private markets

Key Topics Covered:

• Private Credit Expansion: Growing demand for customized, longer-duration financing as bank lending proves inadequate for infrastructure and growth projects

• Insurance Partnerships: Apollo's strategy to capture Japanese insurance assets through reinsurance and investment-wrapped savings products

• Retail Democratization: Expansion of private market access beyond institutions to high-net-worth and mass-affluent Japanese investors

• Regional Diversification: How private markets are benefiting from investor flight away from over-concentrated U.S. asset positions

Key Insights:

• Structural Financing Gap: Japanese banks average three-year loan durations at just 175 basis points over benchmark rates, creating a massive opportunity for private lenders who can provide longer-term, customized financing for major projects and corporate transformations.

• Insurance Industry Transformation: Japan's $2 trillion insurance sector is shifting from pure savings products to investment-wrapped offerings due to new capital standards, positioning Apollo's "stay rich" strategies perfectly for risk-averse Japanese savers seeking better returns.

• Private Markets Regionalization: Increased trade tensions and tariff concerns are accelerating Asian investor diversification away from U.S. assets, with private markets providing currency-hedged exposure to European and regional opportunities previously unavailable through public markets.

• Retail Market Timing: The transfer of Japan's $7.4 trillion in consumer deposits from elderly savers to their heirs coincides with regulatory changes that make private market products more accessible, creating unprecedented retail demand for alternative investments.

• Banking Disintermediation: While Japanese banks will continue to intermediate most transactions, they lack the balance sheet capacity for longer-duration lending, forcing them to partner with private capital providers rather than compete directly.

• Liquidity Convergence: Private investment-grade credit markets are achieving better liquidity than many public market segments due to their massive scale and ratings-driven nature, making them more attractive to institutional investors seeking stable returns.

Memorable Quotes:

• "If money is free, you don't really ask what they're giving you. You just take the money. Now, now that money is not free and the cost of capital is going up and then your cost structure is going up and investors are asking you to think about how do you optimize your capital structure." - Matthew Michelini, explaining why Japanese companies are finally embracing private capital after decades of cheap bank financing

• "The Japanese government was actually quite thoughtful in saying how do we arm an economy that's been financed with zero rates, which has financed stagnation for the last 30 years. It's financed losses, it's financed excess labor, it's financed excess assets." - Matthew Michelini, describing Japan's deliberate policy shift away from zero-rate accommodation

• "You're seeing this wave of this big catalyst that is creating a wave of transaction activity, both for activists, for spin offs, for buyout shops, for private capital providers." - Matthew Michelini, on how regulatory changes are unleashing private markets opportunities across multiple strategies

• "We have a whole suite of what we call stay rich products, not get rich products to help savers invest better." - Matthew Michelini, describing Apollo's conservative approach to Japanese retail private market products

• "It's really hard to get credit excess return per unit of risk in credit in scale across Asia because everything is niche or everything is just targeted to one strategy." - Matthew Michelini, critiquing the fragmented nature of Asian private credit markets

The Wrap: 

Michelini's perspective reveals Japan as the epicenter of Asia-Pacific private markets growth, where demographic shifts, regulatory reforms, and monetary policy changes are converging to create institutional demand for alternative capital. This transformation extends beyond Japan's borders, as the country's investors and corporations serve as a gateway for private markets expansion across the region. The success of Apollo's Japanese strategy could establish the playbook for how private capital providers capture market share in other developed Asian economies transitioning away from bank-dominated financing systems.