Retail and institutional investors interested in exploring the opportunities available to them as a result of the deregulation of Japan's financial services market can tap the expertise of a growing number of U.S. firms. The latest entrant is AMERICAN EXPRESS CO. As soon as it receives a license from the Ministry of Finance, which is expected to occur in November, the credit-card issuer's recently formed AMERICAN EXPRESS ASSET MANAGEMENT INTERNATIONAL (JAPAN) LTD. will begin to offer investment advice. Drawing on the resources of AmEx's American Express Financial Advisors unit, the new company will target its services to the more than 1.1 million AmEx cardholders in Japan. It also will explore ways to expand the institutional presence of American Express Financial Advisors. That group manages in excess of $200 billion in assets for some 2 million clients in the United States.
The broad business alliance between TRAVELERS GROUP INC. and NIKKO SECURITIES CO., LTD. (see Japan-U.S. Business Report No. 346, July 1998, p. 15) is moving ahead on schedule. The New York City financial services powerhouse has completed its purchase of 25 percent of the number-three Japanese brokerage house for roughly $1.5 billion. In addition, Nikko Securities has bought 51 percent of Travelers' SALOMON SMITH BARNEY JAPAN LTD. unit for an undisclosed price. Over the next year or so, the Japanese securities company will transfer to the soon-to-be-renamed NIKKO SALOMON SMITH BARNEY LTD. its corporate finance, capital markets and trading operations as well as its mergers and acquisitions group. Although Travelers' investment banking and brokerage unit is the minority partner in the joint venture, it will run the company.
The world's biggest mutual fund manager continues to broaden its reach in Japan. At the end of September, FIDELITY INVESTMENTS JAPAN LTD. launched its thirteenth local fund or investment trust, the Fidelity Strategic Income Fund, through DAIWA SECURITIES CO., LTD. The company already markets funds through NOMURA SECURITIES CO., LTD. and NIKKO SECURITIES CO., LTD. At the same time, Fidelity Investments Japan has lined up a sixth bank to sell its products once the ban is lifted December 1 on direct sales of investment trusts by banks. HYAKUGO BANK, LTD., a midranking regional bank that has its base of operations in Mie prefecture, will offer the investment vehicles at 10 to 20 of its branches.
Maintaining its reputation for innovative moves in Japan's financial services market, CITIBANK N.A. reportedly has teamed up with ASAHI CHEMICAL INDUSTRY CO., LTD. to offer adjustable rate mortgages. The one- , three- and five-year ARMs carry interest rates of 1.85 percent, 2.15 percent or 2.45 percent, respectively, which are lower than what banks charge on their mortgages. Although the Japanese partner is best-known as a chemicals manufacturer, it has diversified into the housing business.
The Citicard cash card issued to CITIBANK N.A. customers in Japan now has a debit function, thanks to a tie-up with MASTERCARD INTERNATIONAL INC. The automatic purchase system can be used both at home and abroad and with yen or dollar accounts. Starting in January, the postal savings system also will issue a debit card to its customers through an arrangement among the Ministry of Posts and Telecommunications, banks and retailers.
Although deeply discounted property prices in Japan make commercial real estate investments exceedingly attractive to outsiders, many obstacles stand in their way. Expansion-minded GE CAPITAL SERVICES CORP. hopes to get around these roadblocks by partnering with MORI BUILDING DEVELOPMENT CO., LTD. The developer, known for its marketing and management of office buildings in city centers, will identify properties for possible purchase by GE Capital Services and, if given the go-ahead, will negotiate with current owners and creditors, draft contracts and devise property management plans. Joint investments reportedly are an option.
Fifteen unnamed foreign investors, including three major U.S. hedge funds, are backing the $413.8 million DaVinci One Japanese real estate fund. It is buying office buildings, retail complexes and apartment buildings that already have tenants. The investors, which put up $124.1 million of DaVinci One's capital, expect to make money off of rents rather than from real estate appreciation. The fund already has bought eight properties in downtown Tokyo for about $69 million.
An exchange rate of ¥145=$1.00 was used in this report.