The recent acceleration of M&A activity in Japan was clear to many investors. The question is where to look for likely activity in the future. Some investors believed that the improvement of balance sheets at weak companies might reduce their incentive to accept absorption by potential suitors. Others, however, agreed with my view that tougher governance and tougher bank oversight meant that more pressure on the weak firms to accept absorption. As my colleague Naoki Kamiyama points out, about 2/3 of M&A activity is internal to sectors, and thus investors are correct to ask which sectors may be most active. Attention focused on construction, retail, construction, lodging, electronics, and pharmaceutical sectors.
Feldman's piece is discussing how stock market investors have moved away from using the macro recovery in Japan as a reason to invest and are now using thematic or policy-driven ideas. He identifies energy, healthcare and postal reform as the other themes which could throw up investment opportunities.
