Japan's IPO market has raised ¥1.2 trillion ($7.7 billion) in 2025, marking the strongest performance since 2018. Major listings included JX Advanced Metals and SBI Shinsei Bank, while high-profile offerings like Human Made (backed by designer Nigo) and Okinawa's Orion Breweries saw oversubscription exceeding 60 times.

This IPO boom aligns with Asia's broader resurgence in public listings. India set record fundraising levels as companies capitalized on investor demand, while Hong Kong is poised for its best IPO year since 2021. Japan's strong equity demand reflects the TOPIX hitting fresh highs, driven by the end of decades-long deflation and corporate governance reforms.

However, potential challenges emerge as the Bank of Japan prepares for possible rate hikes. Sources indicate the BOJ could raise rates at its upcoming meeting barring major economic shocks, with further hikes contingent on economic conditions. Governor Kazuo Ueda has provided clearer guidance on neutral rates, currently estimated between 1%-2.5%.

Market expectations suggest the BOJ may lift its policy rate from 0.5% to 0.75% in December, potentially revising neutral rate estimates upward to signal room for additional tightening. Former BOJ officials caution against expecting specific neutral rate figures, noting the central bank's preference for policy flexibility through "constructive ambiguity."

Higher rates could impact IPO prospects by: 1) Increasing borrowing costs for IPO-bound companies, particularly cash-strapped SMEs 2) Diverting capital from equities to fixed income 3) Compressing valuations through higher discount rates, especially for growth companies 4) Creating pricing challenges amid market volatility

Some analysts argue rate hikes could ultimately benefit Japan's IPO market if they reflect sustainable inflation and wage growth - signaling a definitive exit from deflation. A stronger yen could also boost international investor participation in Japanese offerings.