Japan's small IPOs drop to 12-year low as market rules tighten

Japan reportedly only 43 IPOs under US$50 million in 2025, marking the lowest number of small listings since 2013, according to Bloomberg data.

The Tokyo Stock Exchange’s recent reforms are prompting private companies to reconsider smaller, fast-track public offerings.

While small IPOs have made up about 82% of Japan’s deals on average from 2015 to 2024, this year’s slowdown contrasts with a rise in total IPO fundraising, driven by larger offerings like JX Advanced Metals and SBI Shinsei Bank.

The exchange has raised the market cap requirement for companies to stay on its startup board, moving from ¥4 billion after 10 years to ¥10 billion after five years.

Institutional investors have shown less interest in small, illiquid IPOs, and experts say the new environment could limit funding options for smaller or lesser-known firms.

Exchange officials say the reforms aim to draw companies with stronger growth prospects to public markets.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

About 70% of existing Growth Market (the Tokyo Stock Exchange’s startup market) companies fall below the ¥10 billion bar

A ¥10 billion market cap bar after 5 years replaces ¥4 billion after 10 years 1. About 70% of the 610 Growth Market companies sit below it as of end-2024 2.
Listings older than 5 years must comply by fiscal year-end 2030 or enter an improvement period 1. Newer listings have 5 years from IPO to meet the rule 1.
Reform tackles IPO-first thinking that left many firms stagnant and light on investor interest 1. With under a year left in the final grace window companies weigh moves such as market transfers or going private 3.

Venture debt demand should rise as startups delay listings

Late-stage startups that once leaned on small IPOs now look at venture debt, a non-dilutive loan for startups 4. The government will add an Enterprise Value Charge, a security interest over enterprise value like IP or customer contracts, which helps lenders value collateral for startups and other entities 4.
In H1 2025, round sizes skewed smaller with median funding per company dropping from ¥83.6 million to ¥67.9 million 5. Top-funded startups raised from corporate VC arms or business corporations rather than pushing for public listings 5.
Private credit lenders and venture debt funds see demand from startups that need bridge funding to reach the ¥10 billion bar 5. As 68% of Growth Market firms may miss the new criteria, M&A will pick up as another exit path 5.