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Apr 26, 2017
byAkane Hashimoto

Japan Post considers multibillion-dollar Toll Group writedown "This event should raise attention to what valuation is and how potential growth prospects need to be reflected in theacquisition price."https://www.bloomberg.com/quote/TOL:AUhttps://www.bloomberg.com/quote/6178:JP What Japan Must Do To Create The Next Sony"The need for a new Meiji!?"

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Apr 19, 2017
 

Call for Applications of Asset Managers for Alternative AssetsJapan's GPIF starts recruiting managers for alternative assets"GPIF moving to find gatekeepers for Real Estate, Provate Equity and Infrastructure." Strong Demand For Smokeless Tobacco In Japan"Well managed Risk Appetite Framework!"

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Noriyuki Morimoto's Blog

Bushido and the Death of Banks

Apr 17, 2017
byNoriyuki Morimoto

A bank is defined to be a bank by accepting deposits. Without those deposits, banks cease to exist. The deposit function bundles payment and saving functions. When fintech causes the bundling of payment and commercial transactions, the functions of deposits and payment are unbundled. Left with the sole function of saving, deposits lose their basis of existence: they have no chance of beating other methods of asset formation such as investment trusts. When deposits, thus banks, cease to exist, what would happen to bankers? The end of typewriters meant the end of typists. Bankers serving a role equivalent to that of typists have no way to survive. But IBM, which used to be a manufacturer of typewriters, stayed true to its mission of rationalizing business processes, and remains a global leader in information services to this day. The same can be said for bankers. Those who have been faithful to the mission of banking would easily find new, and probably more attractive, opportunities outside the conventional banking business. There are people in retail finance who have prioritized the customers’ true benefit when offering investment trusts, insurance, mortgage loans, and other types of consumer loans. Once set free from their sales quota, these people would be hugely successful in asset-related businesses that show signs of strong growth. In corporate finance, people who have been making proposals to improve management and procure funds not only by loans but through methods in the best interest of their clients—that is, people who have truly served as corporate finance consultants—are likely to find attractive positions in investment management and financial divisions of various industries. People who have been working behind the scenes in financial infrastructure, such as bank administration and asset management procedures, shall come to the fore to play creative and innovative roles in the fast-growing fintech field, as well as independent businesses derived from the infrastructure built for financial administration. In short, those who have been bound by strict and cumbersome rules, and forced to prioritize the banks’ profit over customers’ benefit against their will, would be given a new, free environment in which they can unleash their creativity and customer-oriented mindset. There is no more happiness than that. The end of banks and freedom for bankers should be something to celebrate. Newly gained freedom is always a leap from the conventional, which requires determination. Such a determination is possible only when people readily accept that conventional banks are bound to die. To die a false death in order to truly live—that is the real message behind the statement “The way of the warrior is death” in Hagakure, an epitome of Japanese spiritual history.

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Apr 12, 2017
byAkane Hashimoto

Japan’s missing shareholder activism "This is about a speech given by FSA commissioner Mr. Mori at Securities Analyst Association of Japan on Apr 7. Japan asset management industry is about to grow upon  fiduciary reform!?This is about a speech given by FSA commissioner Mr. Mori at Securities Analyst Association of Japan on Apr 7. Japan asset management industry is about to grow upon  fiduciary reform!?" Publication of the draft of the “Principles for Responsible Institutional Investors”«Japan’s Stewardship Code»- To promote sustainable growth of companies through investment and dialogue -"Anyone can provide comments." 

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Apr 05, 2017
byAkane Hashimoto

Japan's BTMU bank mulls fee hike for big clients amid negative interest rates"It is our regulator's policy to ensure sustainable profitability of Japanese financial institutions." Judging Japan Inc.’s health through financial reportingToshiba: Japan’s nuclear challenge Japan court rules in favor of restart of Kansai Elec's Takahama reactors"Interesting restructuring situation which is likely to be an important case study for similar situations." 

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Noriyuki Morimoto's Blog

TEPCO’s Growth Strategy Leads to Fukushima

Apr 03, 2017
byNoriyuki Morimoto

At the end of last year, the Japanese government announced its recommendation for TEPCO’s reform regarding the Fukushima nuclear disaster. Its main objective is for TEPCO to secure funds to address the disaster by focusing the company’s responsibility on economic issues and strengthening its profitability through the execution of a bold growth strategy. In other words, TEPCO’s only way going forward is to strive to become the top diversified energy supplier in the world, let alone Japan. Unless the scale is set at this level, there is no way TEPCO would be able to pay back its huge amount of debt. There are three goals set in the recommendation: creating value as an economic enterprise through reorganizing its nuclear business, creating value through streamlining its power transmission and distribution businesses, and setting its foundation of growth overseas in executing its strategy. The strategy makes sense, but its execution comes with difficulties. The key to success is the strong determination and high motivation of TEPCO’s officials and employees. Of course, feeling responsible for the Fukushima accident should be at the base of that determination and motivation, but that does not necessarily lead to the will to make the company grow. People can hold strong determination and high motivation only when they are directed towards growth. The government states that TEPCO has to grow in order to fulfill its responsibilities, but it should take one step forward and declare that the most important mission of TEPCO’s officials and employees at this point is to execute its growth strategy, and it is impossible for the company to take responsibility for the Fukushima accident unless it accomplishes growth. The success of the growth strategy depends on TEPCO’s concerted effort and confidence in working towards the ambitious target of becoming the world’s largest and best energy company. The resolution of Fukushima lies beyond that goal, and that is the only way to approach Fukushima. There is no growth without Fukushima, and no Fukushima without growth. We have a nuclear station that caused an accident and remains in dangerous conditions, posing difficult technological challenges, and people forced to flee their homes who remain in need of support. Moreover, a major reform of the overall energy mix is essential to increase the economic benefit for Japanese citizens. Debates on whether the recommended strategy may succeed are not only needless but irresponsible. TEPCO, the government, and all related parties have to execute the strategy with strong determination and willpower to make the impossible possible. There is no other road to Fukushima, and no other way out of Fukushima either.

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Today's Pick

Mar 29, 2017
byAkane Hashimoto

Taking the bite out of Japan's financial watchdog"Very proactive approach to be part of market growth and innovations. Most picked are news are about governance and potential improvements." 

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Mar 22, 2017
byAkane Hashimoto

Japan PM Abe: We count on Saudi Arabia to play crucial role in the region"Positive view on Japan may help this country grow roles in the Gulf region." Japan's Aso: No G20 Member Was Against Free Trade "Copnfirming free trade environment is key to sustainable world economy. Japan to lead?" Japan not considering support for Toshiba: Govt spokesman"While business quality remains, lack of governance at the company level is causing huge problems. Hopefully this will drive to grow diverse funding sources for corporate Japan." Japan FSA to undergo first reshuffle in two decades under new proposal: sources"Regulator leading improvements of Japanese financial industry." 

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Noriyuki Morimoto's Blog

Unbundling Trust Banks

Mar 21, 2017
byNoriyuki Morimoto

The trust bank is a business structure unique to Japan which bundles banking and trust businesses. Recently there was news that the Japan Financial Services Agency (JFSA) is considering unbundling trust banks. Although the information has not been verified, it can be naturally expected from the ongoing trends of financial administration. Trust banks provide a vast range of functions, including many non-financial roles such as real estate-related activities. The original social function of a trust itself is non-financial. Needless to say, bundling of these businesses had a historical background and rationale. In Japan’s period of high economic growth, trust banks played a crucial role as a major provider of long-term financing. However, in the current social and economic environment, the significance of trust banks has to be reconsidered. If the bundling had been for the benefit of clients, there is no reason to limit the roles to trust banks, and other entities such as banks should be able to engage in the same businesses. If it had been for the trust banks’ benefit, there is no reason to support their existence. So in any case the structure of trust banks is bound to disappear. It is necessary first to completely unbundle the functions of trust banks, and then to consider how to rebundle them from the users’ perspective. Last year, Mizuho Financial Group drastically reorganized its investment and management businesses into a new company called Asset Management One, which is directly held by the holding company. As a result, Mizuho Trust Bank, which has already discontinued many of its banking functions, was separated from its core asset management business, being virtually dismantled. It is a matter of time that it would fully withdraw from the banking business to convert to a specialized trust firm. The unbundling of financial functions lead to the dismantling of financial institutions, which immediately triggers rebundling from the clients’ perspective. Thus dismantled financial institutions are reorganized into a group of subsidiaries under a holding company. Against this backdrop, the JFSA is ordering megabank groups to conduct strict management of internal conflicts of interest. While Mizuho Financial Group leads this movement, the other two megabank groups are likely to be seriously considering how to turn to the same direction. It is especially worth watching the two groups with trust banks, namely Sumitomo Mitsui Trust Holdings and Resona Holdings. Now, how will the two groups be dismantled and reorganized?

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Today's Pick

Mar 15, 2017
byInvestment in Japan

SoftBank to sell 25% stake in ARM to Vision Fund: sources"SoftBank's Vision fund is expandig"

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Recent News

Today's Pick

Mar 08, 2017
byInvestment in Japan

BOJ faces call to release handbrake, let longer yields rise"Facing hard decision making"

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Noriyuki Morimoto's Blog

Japan’s Financial Reform: Downsizing Banks, Expanding Investment Management

Mar 06, 2017
byNoriyuki Morimoto

When Japan was recovering from World War II, following the loss of whatever wealth was accumulated pre-war, meeting the huge demand for funding was a grave problem. To deal with this problem, measures were taken to create large funds by gathering and amplifying small amounts of savings. Thus thorough policies were implemented for the protection and growth of financial institutions. The financial sector was heavily regulated so that a high barrier to entry would be created and protect the financial institutions. This protection would allow financial institutions to fully execute their role of providing money to industries with strong funding demand, ultimately making the economy grow. Protectionism by the name of regulation was justified from the increase in wealth among the Japanese people as a result of economic growth. A representative protection policy targeted long-term credit banks, which were authorized to issue financial bonds, a special form of corporate bonds. Long-term credit banks played a crucial role in economic growth by actively providing long-term financing for capital investment. However, the structure of the finance sector that had been effective from post-war reconstruction to the high economic growth era was causing discrepancies with economic reality by around 1980, when economic growth was clearly slowing down. Consequently, the gap between the funding capacity of the financial sector and demand from industries led to a flow of excess money into speculative real estate investments. That resulted in the short-lived frenzy of the 1980s bubble economy. An epitome of the inevitable burst of the bubble economy was the collapse of the two long-term credit banks in 1998. This had not been a coincidence— long-term credit banks, which had lost their original role in the society, had gone down the inevitable path of suicidal adventure. The need for a reform in the financial system had no doubt been recognized by the regulatory authorities by around 1980. But as a result of over-protection, the authorities could not change the financial institutions that had become powerful entities. When a serious financial crisis occurred in 1998, the momentum towards a reform was heightened for a while, but it rapidly winded down as the crisis was resolved. And now in 2017, JFSA commissioner Mori launched a financial regulation reform, which is the third and probably last chance to make a change. Its objectives include downsizing banks and insurance companies that had supported high economic growth in the past, expansion of investment management businesses such as investment trust funds, and as a prerequisite, thorough implementation of fiduciary duties to raise the quality of asset management activities. The Japanese financial system has finally entered a phase of a major overhaul.

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