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Feb 22, 2017
byAkane Hashimoto

Japan Releases Draft ‘Principles for Customer-Oriented Business Conduct’"Must read for all investment managers conducting business in Japan." 

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Noriyuki Morimoto's Blog

Why “Japan-style lending exclusion” is Deemed Japanese

Feb 20, 2017
byNoriyuki Morimoto

The Japan Financial Services Agency (JFSA) has raised the issue of “Japan-style lending exclusion”. This refers to the situation in which entities “without strong collateral/guarantee/balance-sheet but with solid future business prospects or pivotal roles in the local economy” fail to receive sufficient funding, because financial institutions make credit and financing decisions based on fixed standards that focus on financial indicators of whether a company has sufficient collateral/guarantee and a strong balance sheet. This kind of lending exclusion is not a uniquely Japanese problem. So why is it explicitly called “Japan-style lending exclusion”? The intention of JFSA or Commissioner Nobuchika Mori behind this expression is not indicated, but I assume it is related to the weak market functions which are characteristic of the Japanese finance industry. The Japanese finance industry is overwhelmingly dependent on indirect financing, or the intermediary function of financial institutions such as banks that handle deposits. Its direct financing function, delivered through the capital market, is very weak. Therefore, when lending exclusion occurs in the financial intermediary function, the market function falls short of supplementing its role. It seems that the term “Japan-style lending exclusion” was adopted to raise awareness of the structural problem of the Japanese finance industry. The current direction of the JFSA is clearly aiming for the shift from indirect to direct finance. The fundamental shift from indirect to direct (i.e. from the financial intermediary to capital market function) is not expressed in its Strategic Directions and Policies, but there are several signs that the order of priority has changed. For example, policy measures for the financial intermediary function used to be listed before those for the capital market function, but the order was reversed from last year.  And above all, the emphasis in the direction of retail financial service from saving to asset building essentially means the shift from deposits to trusts and other investments. This is an indication of the shift in priority from financial intermediary to capital market functions. In other words, “Japan-style lending exclusion” not only refers to the need to strengthen the financial intermediary function, but also entails issues in the capital market function.

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Recent News

Today's Pick

Feb 15, 2017
byAkane Hashimoto

Toshiba shares slide after it says could sell more of chip business"Hopefully this situation do not represent corporate Japan's governance standard. shareholders and private equity funds reactions are key to improve healthy tensions." 

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Updates

Dec 02, 2016
byPavilion Global Markets Ltd. _

Our CEO Noriyuki Morimoto spoke at "Insurance Risk Management Conference 2016" organised by Moody's Analytics

Dec 02, 2016
byPavilion Global Markets Ltd. _

We have published the summary of the questionnaire responses that we took from participants of the 5th Industrial Finance Forum held on 8 November 2016. The conference featured "Revitalization of regional economy through financings that value to the real businesses

Nov 28, 2016
byPavilion Global Markets Ltd. _

Noriyuki Morimoto, our CEO, has contributed an article to the December issue of Monthly Financial Journal.  The issue features “Renewing Asset Management in Japan”.

 

The article Noriyuki wrote is titled “Fiduciary Duties that regional banks should work for”

Nov 08, 2016
byPavilion Global Markets Ltd. _

Noriyuki Morimoto, our CEO, has been named one of “Top 7 CEO with degree in Philosophy” by PRESIDENT, a leading business publication in Japan

 

PRESIDENT featured Noriyuki in their 5 Dec 2016 issue, in its special article “Philosophy to Enrich Your Days in Offices”.  7 CEOs were featured and each recommended a philosophy book that she/he come back to from time to time

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