According to Bloomberg Business, the number of companies listed on the Tokyo Stock Exchange is set to fall by 58 to 3,778 by year’s end. That’s a massive reversal from a decline of just one listing in 2023 and consistent annual increases dating back to the TSE’s merger with the Osaka exchange in 2013. Japan has historically had a huge number of listed firms—nearly as many as the U.S. but with an economy only a seventh the size. The current drop is being fueled by a boom in mergers and acquisitions. This marks the first significant decline in over a decade, breaking a long-standing trend of expansion.
Why the sudden shift?
So, what’s going on? For years, Japan‘s market was packed with smaller, sometimes stagnant, publicly traded companies. The government and the Tokyo Stock Exchange itself have been pushing for consolidation and better governance, basically telling firms to shape up or get bought out. And now, with a weaker yen making Japanese assets look cheaper, both domestic and foreign buyers are pouncing. It’s a perfect storm of policy pressure and financial opportunity.
A market growing up
Here’s the thing: this isn’t necessarily bad news. A bloated market isn’t a healthy one. Having fewer, but larger and more competitive, listed entities could lead to better returns for investors and more efficient capital allocation. Look, it’s a sign of a maturing market. Companies are merging to gain scale, exit unprofitable lines, or simply because it’s smarter than going it alone. You can see the full listing data on the JPX website, and the trend is clear.
Implications and what’s next
I think we’re seeing the start of a major consolidation wave. This record decline probably isn’t a one-off. Expect more M&A activity, especially in fragmented sectors. For global investors, it means the Japanese equity landscape is fundamentally changing. The era of countless tiny, illiquid stocks is winding down. But will this lead to a more dynamic corporate Japan that can truly compete globally? That’s the billion-yen question. The pressure is now on these newly formed, larger entities to deliver.
