Japan M&A Boom Will Lead Country Out of Deflation, Says Freeze

Japan M&A Boom Will Lead Country Out of Deflation, Says Freeze
Japanese mergers and acquisitions are set to increase and will help steer the country out of deflation, said Curtis Freeze, chairman of Honolulu-based Prospect Asset Management Inc.

There will be at least 100 transactions with a value of $1 billion for both inbound and outbound deals in the next few years, said Freeze, who is also chief executive officer of Gro- BeLS Co., a Tokyo-based real-estate firm. That will create opportunities for investors in the world’s third-largest economy, he said at the Hedge Funds Asia Summit hosted by Bloomberg Link in Hong Kong today.

“Japan’s best day is yet to come,” Freeze said. “There is going to be more activity” as Japanese companies look to buy firms at home and Asian companies look to access capacities of Japanese firms, creating opportunities for investors, he said.

“Japan is the world’s most cash-rich country,” Freeze said. “And that’s exciting.”

The value of takeovers and asset sales involving Japanese companies worldwide has reached $93 billion this year, according to data compiled by Bloomberg. That compares with $128 billion in 2009 and $153 billion in 2008, the data show.

The Bank of Japan earlier this month pledged to keep its benchmark interest rate at “virtually zero” until deflation has ended and created a 5-trillion yen ($61 billion) asset- purchase fund to buy government debt and assets including exchange-traded funds and real-estate investment trusts.

Japan’s gross domestic product may shrink for the first time in more than a year in the three months ended Dec. 31, according to a survey by the government-affiliated Economic Planning Association. The economy grew at a 1.5 percent pace in the second quarter, half the pace of the first quarter of 2010.

The catalyst for Japan defeating deflation will be “change in control” amongst Japanese firms rather than government policies, Freeze said. As aging owners of Japanese firms are replaced, their successors will look for new business strategies, Freeze said.