The number of small initial public offerings (IPOs) in Japan has plunged to its lowest level in over a decade this year, as reforms by the Tokyo Stock Exchange prompt private companies to reconsider rushing to go public.

Data reveals that Japan recorded only 43 IPOs valued below $50 million this year, the smallest number since 2013. In stark contrast, the total capital raised from IPOs hit a seven-year high, driven by several blockbuster listings such as JX Metals and SBI Shinsei Bank.

Historically, Japan's IPO market has been dominated by small-scale deals. Based on the average of compiled data from 2015 to 2024, small IPOs accounted for approximately 82% of the country's total listings over the past decade. This compares to a 76% share for small deals in India and 55% in Hong Kong.

"For newly listed companies, continuous growth post-IPO is critical, and the market is now saying 'no' to those that fail to achieve sustainable expansion," stated Hiroaki Tomori, an executive fund manager at Mitsubishi UFJ Asset Management. He added that small IPOs typically underperform in terms of share price.

More than twenty bankers, accountants, investors, and corporate executives involved in small IPOs noted that smaller companies often exhibit more volatile earnings and struggle to command attractive valuations during their listings. Institutional investors also tend to avoid these less liquid stock offerings.

In response to these concerns, the exchange has announced it will raise the bar for companies to maintain their listing status on the growth market. It will require firms to maintain a market capitalization of at least 10 billion yen ($64.2 million) five years after listing, compared to the current requirement of 4 billion yen after ten years.