Follow us

Herbert Smith Freehills’ sixth annual Japan-Australia M&A and Investment Report reveals a step change in the Japan-Australia relationship — it is now a closely aligned partnership with greater government and business collaboration, and more cooperation than ever before. Decarbonisation and energy security were the central focus of investment and partnerships in 2022, and will continue to be a focus in 2023. 

Herbert Smith Freehills senior advisor and Australia Japan Business Co-operation Committee Vice-President Ian Williams explains, “As Japan progresses towards its commitment to net-zero emissions by 2050, there is a huge opportunity for Australia to be the natural partner for this transition. We saw 13 publicised ministerial level meetings or calls between Australia and Japan in 2022, many of which reiterated Australia and Japan's shared commitment to decarbonisation and the desire to cooperate on new energy technologies."

“What Japan is currently working through is a so-called energy quadrilemma. This is not a new phenomenon — the energy transition involves clear challenges in terms of balancing affordability, security and sustainability. However, in the Japan-Australia investment context, there is a fourth tension with profitability. Japanese companies have traditionally employed a natural hedge by being both purchaser of and producer in Australian energy and resource projects. As Japanese companies continued to divest from fossil fuel assets in 2022, we saw an impact on their profitability, particularly as energy prices increased to record highs. 

“To achieve a suitable balance as it progresses through the energy transition, Japan is being pragmatic about the technologies it is exploring. Interest in Australian LNG has continued. There has also been significant investments into feasibility studies for producing and commercialising blue and green hydrogen exports, as well as into carbon capture and storage technology. Importantly, there is a lot of financial and political support for these projects across Australian Federal and State Governments and the Japanese Government."

Technology — including DX, innovation and venture capital — was another key target for investment in 2022, as predicted in last year’s report. 

Damien Roberts, Herbert Smith Freehills partner and lead of the Japan team in Australia, explained, “Australia is increasingly seen as a legitimate and credible player in the technology sector. Australian software companies and start-ups have been really succeeding in recent years, which has drawn the attention of foreign investment.”

“At the same time, Japan is pushing for greater investment in innovation as a means of driving productivity. Japanese Prime Minister Kishida’s “New Capitalism” agenda places a heavy focus on innovation by both start-ups and traditional large-size companies. In response, Japanese companies have adopted a co-creation mindset to innovation, looking to establish cross-border relationships. They are proactively identifying overseas companies that can provide new software or know how, which can in turn be applied internally or distributed globally as a product."

Both M&A transaction and partnership numbers were higher in 2022 compared to 2021. There were 50 transactions comprising 42 acquisitions and eight divestments, and 51 partnerships. 15 transactions were in mining or energy, including renewable energy and new energy technologies. There were 12 acquisitions in the technology sector. 39 partnerships were related to the energy transition or energy security.

Mr Williams noted, “Restrictions on travel proved to be a major impediment to investment in 2020 and 2021. The underlying drivers of Japanese investment into Australia remain strong, and with travel between Australia and Japan recommencing in 2022, we have seen the number of transactions naturally increase.”

Mr Roberts added, “Investment activity is reverting to pre-pandemic levels as expected. The fundamentals of the Japan-Australia relationship have never been stronger. We saw established companies not only investing in new opportunities, but also expanding on existing investments, which is a testament to their long-term commitment to Australia. The considerable interest in signing partnership agreements is also promising, as these will likely mature into commercial agreements in the years to come." 

Other key findings from the report:

  • The highest value transaction of the year was Tokyo Gas’ US$2.15 billion (A$3.3 billion) sale of its interest in four LNG projects (Woodside’s Pluto LNG, Chevron’s Gorgon LNG, QGC’s Queensland Curtis LNG and INPEX’s Ichthys LNG) to MidOcean Energy. The proceeds of the sale are to be redirected to renewable energy and hydrogen production.
  • New energy-related MOUs and joint feasibility studies that were signed in 2019-2021 are now progressing to proof of concept and implementation phases as the projects aim for commercialisation by 2030.
  • A milestone was reached in the blue hydrogen sector in March 2023, with the Japanese Government’s Green Innovation Fund committing A$2.35 billion to Japan Suiso Energy (a joint venture between Kawasaki Heavy Industries and Iwatani) and ENEOS to lead a project to export blue hydrogen in the Latrobe Valley in Victoria to Japan through the Port of Hastings. Under this project, a joint venture between J-Power and Sumitomo Corporation will supply 30,000 tonnes of hydrogen a year. This was a direct commercialisation of the Hydrogen Energy Supply Chain (HESC) Pilot Project which concluded on 31 December 2022.
  • The three Japanese mega-banks (MUFG, SMBC and Mizuho) among the leading project financiers in Australia and both Japanese Government-owned JBIC and JOGMEC supporting Australian decarbonisation initiatives.
  • Increasingly close cooperation between Japan and Australia on strategic defence issues is likely to drive greater investment and technological cooperation.
  • Critical minerals will be a key focus for Japanese investors, supported by JBIC and JOGMEC, as Japanese government agencies seek to create and maintain stable supply chains. In October 2022, a joint partnership was announced between the Australian and Japanese trade and industry ministries to develop and promote a critical minerals supply chain.
  • With flights resuming between Australia and Japan (and some domestic carriers receiving State Government funding to provide discounted airfares), we would expect to see a number of positive downstream effects in 2023, including a renewed interest in the tourism sector (such as hotels), a recovery in the export of education to Japanese students and a general increase in investment activity as in-person meetings and networking opportunities recommence.

Read the full report:

Key contacts

Damien Roberts photo

Damien Roberts

Partner, Sydney

Damien Roberts
Ian Williams photo

Ian Williams

Senior Adviser, Brisbane

Ian Williams

Media contact

For further information on this article please contact

Emily Coultas

External Communications Manager


Australia Melbourne Brisbane Perth Sydney Damien Roberts Ian Williams