The number of initial public offerings in Japan has been falling sharply, reflecting a slowing pace of new listings by software-related companies that had previously led IPO activity in the country. Companies are moving to postpone their IPOs amid financial market turmoil caused by the war in Iran, concerns that artificial intelligence could replace traditional software products and businesses, and rising interest rates. The Tokyo Stock Exchange’s mainstay Prime, Growth and Standard sections saw 17 companies go public in the first half of the year, down about 30% from a year before, according to the TSE.
Annual IPO activity has been lackluster since the number peaked at 123 in 2021, when fundraising conditions were favorable as countries eased monetary policies to combat the COVID-19 pandemic. IPOs have declined particularly sharply on the TSE’s Growth section for startups since 2025. The benchmark gauge for the section, the TSE Growth Market 250 Index, has trended lower since 2022, creating an unfavorable environment for IPOs.
The decrease also reflects the TSE’s decision to require newly listed firms to reach a market capitalization of at least ¥10 billion within five years of their IPOs to stay on the Growth section, as part of its focus on encouraging startups to thrive after going public. The stricter listing maintenance criteria has prompted an increasing number of companies to shift to the second-tier Standard section. Earlier this year, stock markets worldwide were hit by the so-called Anthropic shock after the rise of the U.S. company’s AI services fueled concerns the technology would replace traditional software products and businesses.
Combined with rising interest rates across the world stemming from the Iran war, the number of IPOs on the Growth section fell by 40% in the first half of the year from a year before, to 11. Software as a service (SaaS) firms, which provide cloud-based software for enhancing operational efficiency, make up a certain share of companies going public on the Growth section. Looking ahead, IPOs by companies expected to receive government support in areas including autonomous driving, space and semiconductors are seen as promising.
Large-scale IPOs are still scheduled for later this year, such as Tier IV, an autonomous driving system developer. Market participants have strong interest in so-called deep tech-related companies that aim to resolve social issues through technological innovation.
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