Just as Japan's economy is starting to change to meet current and expected challenges arising from the long domestic recession and globalization, its securities industry is remaking itself to respond better to shifts in regulation and competition. Tokyo's Big Bang financial market deregulation program already has altered the playing field for the brokerage business. It will continue to do so until the reforms are completed at the end of FY 2001. Japanese stockbrokers face new competitors as a result of the Big Bang at the same time that they are trying to repair public images heavily damaged by their own missteps.
To tackle these challenges, Japan's securities industry is rethinking operations and customer relations as well as its role in domestic and global financial markets. Considerable opportunities exist for Japanese brokerage houses to prosper, such as those to be gained by better meeting the needs of the nation's rapidly aging population and by cashing in on the new world of Internet-based commerce. Whether such ventures will lead to profits or pitfalls is the number-one question on the minds of executives of Japan's securities companies.
JAPAN'S BANKS' FY 1998 BUSINESS RESULTS: THE GOOD, THE BAD AND THE UGLY by Jon Choy
Japan's top 17 banks reported a combined net after-tax loss of ¥3.6 trillion ($30 billion at ¥120=$1.00) for the year ending March 31, 1999, an unprecedented flood of red ink. Their spokespeople said that profits from core banking activities were an aggregate 22.1 percent below the year-earlier level and that pretax losses were a hair under ¥6 trillion ($50 billion). Compared with big banks' FY 1997 annual reports (see JEI Report No. 21B, June 5, 1998), the latest numbers seem bleak. Bank executives insist, however, that there is a silver lining. In their opinion, the negative results show that Japan's money-center banks faced their nonperforming-loan problems squarely in FY 1998. This assertion has generated skeptical responses from investors, depositors and analysts alike.
FLURRY OF ACTIVITY INVOLVING BANKS AND INSURERS IN JAPAN RAISES QUESTIONS by Douglas Ostrom
In mid-May, Tokyo, after letting it be known that regulatory authorities were shifting their attention from big banks to other troubled financial institutions, made good on its word. Within the space of a few weeks, it announced the closure of one regional bank, issued tough orders to another and shuttered a life insurance company. Interpretations of these actions differed, however. Japanese analysts were inclined to see the new emphasis as a sign that the most serious problems of the banking industry were history, leaving only the task of mopping up long-standing, widely acknowledged difficulties at institutions of lesser importance. American observers tended to argue that the strategy was to look busy by going after the minnows, thus allowing the big fish to escape.
OBUCHI CABINET APPROVES PLAN TO DEAL WITH SHIP INTRUSIONS by Barbara Wanner
Anxious to avoid a repeat of the March 23 intrusion of two suspected North Korean spy ships into Japanese waters (see JEI Report No. 13B, April 2, 1999), the cabinet of Prime Minister Keizo Obuchi approved a new operational plan June 4 aimed at improving coordination between the Maritime Safety Agency, Japan's coast guard, and the Maritime Self-Defense Force in such situations. The framework also calls for better equipping the two services to interdict rogue vessels.
EAST ASIAN LEADERS GATHER IN TOKYO TO DISCUSS REGION'S FUTURE by Marc Castellano
Top political and business leaders from 11 East Asian nations descended on Tokyo in early June for a conference sponsored by Nihon Keizai Shimbun, Japan's leading business daily, aimed at addressing regional economic problems and prospects. At the Fifth International Conference on the Future of Asia, held June 3 and June 4, Prime Minister Keizo Obuchi announced a new plan of support for East Asia and Foreign Minister Masahiko Komura called for a revamped security framework to ensure stability in Asia. The participants also exchanged views on such issues as regional integration, protectionist trade policies and financial regulation.
The other shoe dropped June 2 for steel mills in Japan. Continuing the U.S. industry's systematic assault against the "flood" of unfairly priced foreign carbon flat-rolled steel, eight integrated steelmakers and minimills plus the United Steelworkers of America union accused suppliers there and in 11 other countries of dumping cold-rolled steel. They also cited exporters in four of these nations with receiving subsidies.
The United States is prepared to launch World Trade Organization dispute-settlement proceedings if Japan does not follow through on its early May commitments to eliminate a pair of competition-crippling barriers in its huge telecommunications market. U.S. Trade Representative Charlene Barshefsky made this statement June 4, the deadline for Tokyo to respond to Washington's March 30 demands that Nippon Telegraph and Telephone Corp. cut the fees it charges other carriers to connect with its network and that regulators let carriers use a combination of leased capacity and their own facilities to provide services (see JEI Report No. 14B, April 9, 1999).