Japan’s record-breaking investment into Australia set to continue

Japanese M&A in Australia reached record-breaking numbers in 2024, according to a new report from international law firm Herbert Smith Freehills and The Australian National University (ANU).

The eighth annual Japan-Australia Investment Report from Herbert Smith Freehills and the ANU features an in-depth analysis of Japan-Australia M&A transactions and partnerships throughout 2024.

Insights were derived from a thorough examination of the deal trends that defined 2024, and identified key drivers for the future that will influence the trajectory of the Japan-Australia relationship in 2025 and beyond.

The report's impressive data illustrates the strength of the investment relationship between Japan and Australia.

With 72 transactions and 55 partnerships during 2024, total Japanese direct investment into Australia increased to a record A$141.1 billion, representing 11.95% of all FDI into Australia.

Ian Williams, Senior Advisor at Herbert Smith Freehills and co-author of the report, said, “Australia’s attractiveness as an investment destination for Japanese companies and government institutions continues to strengthen and grow, with 2024 the third consecutive year of record activity involving Japanese companies.

“Whilst the trend was temporarily stalled by the COVID-19 disruption, Japanese investors continue to show enormous confidence in the economic future of Australia and Japan's role in its development — Japan ranked third in terms of cumulative FDI into Australia, and Japan remains the only foreign investor to have increased its FDI into Australia in every single year over the past 11 years.

“Importantly this not just a one-way relationship — two-way trade between Australia and Japan was valued at A$113.4 billion, making Japan Australia's second largest trading partner and second-largest export destination at A$80.5 billion.”

While investments spanned many sectors including LNG, renewable energy and decarbonisation, technology, financial services, and consumer goods, Australian real estate remained hot property for Japanese investors. The report identifies Japan as the second largest source of foreign investment in Australian real estate in 2024, with total investment of over
A$3 billion.

“The last two years of investment in real estate were higher than the previous 22 years combined,” said Ian.

“Australian commercial real estate continues to be a prime target for Japanese investors looking for growth — the opportunity to diversify income streams in a market where there is population and GDP growth, medium yields, political stability, transparency and a resilient economy makes Australian real estate a structurally attractive market.

“While we expect to see even greater sector diversification, real estate will continue to be the hottest sector for new entrants and investment in 2025, as projects complete internal approvals and begin to be implemented.”

Decarbonisation was identified as a focus of new investment in Australia for Japanese businesses. In 2024, 11.1% of Japanese M&A investments into Australia were in the renewable energy and decarbonisation sector.

Tokyo partner Andrew Blacoe explained, “There was an increased focus on proven technologies and immediate commercial opportunities rather than longer-term demonstration projects, which was exemplified by J-POWER’s A$380 million acquisition of ASX-listed Genex Power — one of 2024’s largest renewable energy transactions."

The report explains that Japanese companies are beginning to see investment in renewables in Australia an intermediate step for green investment before green hydrogen and green ammonia become commercially viable.

Andrew added, “The physical limits on renewable energy in Japan means that transportable clean energy will be a big part of Japan’s decarbonisation.

“Australia has the potential to be a major supplier of Japanese hydrogen and ammonia in the future and this has been the source of much excitement in the relationship, building on the close political relationship and established trade in fossil fuels.

“New technologies and business models, such as processing and manufacturing goods in Australia using renewable energy for export to Japan, will be essential in achieving net zero emissions in both countries.”

Looking to the future, the report predicts more record-breaking M&A transactions and continued growth in FDI.

Sydney partner Damien Roberts said, “Some of Japan’s most frequent investors were a little less visible in 2024, but we have seen significant market research undertaken which we expect will again result in further investments from these corporates in both core and new sectors in the years ahead.

“It’s been an impressive start to 2025 with a variety of deals including Mitsui’s US$5.34 billion acquisition of a 40% interest in the greenfield Rhodes Ridge iron ore project, Daibiru’s purchase of a Sydney CBD office tower and TAL’s 15.1% investment in Challenger.”

Investment is predicted to continue, with the report outlining that the fundamentals in the Japan-Australia relationship are as strong as ever, and the complementarity continues to evolve and deepen.

Damien added, “Changes in the global geopolitical environment continue to bring the two countries closer together as essential economic partners, particularly in their shared commitment to achieving energy transition to net zero by 2050.

“It is an exciting time for the resilient Japan-Australia investment relationship. The depth and breadth and complementary nature of this partnership is more evident than ever before, and is bolstered by expanded government support, bilateral cooperation and business collaboration.”

Herbert Smith Freehills’ Australia Japan Practice is a unique team of experienced bilingual and bicultural lawyers, specialising in advising Japanese businesses on their investments and operations in Australia, working closely with the firm's longstanding Tokyo office. The Herbert Smith Freehills team has more experience advising Japanese businesses on Australian investments than any other law firm.

To find out more and access a full copy of the report, which is available in both Japanese and English, please visit: https://www.herbertsmithfreehills.com/insights/2025-04/japan-australia-investment-report-2024-record-breaking-japanese-investment