Recof sees Japan M&A rebound in H2

By David Dolan and Emi Emoto

TOKYO (Reuters) - Japanese firms are likely to soon start shopping overseas again as financial markets stabilize and companies dependent on a shrinking domestic market look abroad for growth, the head of a merger and acquisitions advisory firm said on Tuesday.

Buoyed by a strong yen and weak share prices worldwide, retailers, paper makers and others are likely to make acquisitions to tap fast-growing markets in Asia, said Hikari Imai, president and chief executive of Recof Corp.

"The major, major driver is the reduction in size of the domestic Japanese market. That's a threat for domestic companies. They need to find a new frontier," Imai told the Reuters Japan Investment Summit.

Japanese firms spent a record of nearly $70 billion buying companies abroad in 2008, but that shrank to just $9.5 billion yen in the first six months of this year, according to Thomson Reuters data.

But that is likely to improve as financial markets slowly return to normal, making companies less wary about spending their money, Imai said.

Paper makers, food companies, retailers and insurance firms are likely candidates, he said, adding that he was advising some chemical companies looking to make acquisitions in Europe.

Japanese firms have been increasingly pushing abroad to compensate for a shrinking domestic market.

Earlier this year Kirin Holdings (2503.T), Japan's second-largest brewer, agreed to buy a 43.3 percent stake in the beer unit of Philippines conglomerate San Miguel Corp (SMC.PS) for about $1.2 billion.

Last year Tokio Marine Holdings (8766.T), Japan's biggest property and casualty insurer, said it would pay about $4.7 billion for U.S. insurer Philadelphia Consolidated.

The acquisitions won't just be abroad either, Imai said. Regional banks, saddled with a sharply declining rural population are also likely to see consolidation, he said.

(Reporting by David Dolan and Emi Emoto; Editing by Hugh Lawson)