Private credit investors could increasingly look to Japan for opportunities within 2026 due to elevated interest rates in the country, according to a study by iCapital.
The alternative investment platform has predicted that Japan will become a key market for alternative credit. In its 2026 outlook, the firm said that while the expansion of private debt in Japan has been slower than in other major developed economies, yields on Japanese instruments could attract growing investor interest.
This comes as US interest rates are expected to fall within the year, prompting investors to seek global diversification in fixed income markets.
Read more: Fiera Capital deepens Japanese private markets presence
The firm added that deal structures may evolve to encourage greater investor participation, with general partners increasing their presence in Japan and offering solutions that provide a degree of liquidity.
Japan’s largest lenders are also partnering with private credit providers to expand origination opportunities, creating an additional source of returns with potentially improved risk management due to local expertise, the report said.
Read more: Carlyle joins with SBI to tap Japan’s private credit boom
The survey also highlighted Europe, describing it as “fertile ground” for direct lending, given an economy driven by mid-sized companies. It noted that the region benefits from structural inefficiencies in financing this segment and from generally lower valuations compared with the US.
However, investable opportunities in Europe still lag the US by several years in terms of market maturity and access, and remain closely tied to overall private equity activity, iCapital cautioned.
Read more: ‘Tilt’ towards Europe as private credit fundraising surges
