Thursday, July 23, 1998
The Japanese financial crisis has led to speculation that foreign financial institutions will make a killing in the Japanese market. In fact, the American media report with some regularity new ways in which foreign banks, securities companies, mutual fund concerns and insurance firms are penetrating the Japanese market, often for the first time in any meaningful way.
The statistical evidence for this phenomenon is generally lacking and, in at least one important case, the evidence points the other way. Foreign banks operating in Japan have lost market share in the past year, whether measured by deposits or by lending. The foreign share of bank deposits declined to 1.75 percent in April (the most recent month for which figures are available) from 1.86 percent a year earlier; for lending, the decline has been to 2 percent from 2.1 in April, 1997. Other data suggest that these downward trends have been underway for at least two and a half years. (All data come from the Bank of Japan) This deterioration has occurred even in the face of bankruptcies among their Japanese rivals and a loss of confidence in Japanese financial institutions generally during the past year.
Although comparable data are not available regarding insurance and securities, the trends may well be different in these industries. Nonetheless, the banking data suggest reasons to be skeptical of claims from Japanese sources eager to demonstrate that the nation's financial markets have become more open and from their allies in the PR departments of American firms keen to claim success in the huge Japanese market.
"JEI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.