Sumitomo Mitsui Financial Group and Nippon Life are in discussions to establish a private credit fund of at least ¥500bn, equivalent to approximately $3.1bn, Bloomberg reported.

The fund would focus on providing loans for buyouts, alongside real estate financing and mezzanine capital, marking a strategic expansion into private credit for two of Japan’s largest financial institutions.

The partners are considering setting up a joint venture to manage the vehicle, which could also attract third-party investors, although final details remain under negotiation.

The move reflects a structural shift in Japan’s credit market, where lending for leveraged buyouts has historically been dominated by the country’s largest banks.

However, increasing deal activity, driven by corporate carve-outs and take-private transactions, is creating demand for more diverse financing sources.

Regulators and industry participants are encouraging broader participation in LBO financing to reduce concentration risk and support market development.

At the same time, global private equity firms including Apollo, Blackstone, and KKR have been expanding their presence in Japan’s private credit market, seeking to originate loans locally.

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