Former Toyota chairman to prioritize overseas business opportunities for Japanese companies

Okuda to lead JBIC in new direction

by Jun Hongo

Staff Writer

Upon assuming the presidency of Japan Bank for International Cooperation on April 1, Hiroshi Okuda told reporters that Japan today is lagging behind the rest of the world in both politics and economy by a wide margin.

“We are probably about two to three laps behind,” said Okuda, 79, whose resume includes president of Toyota Motor Corp. as well as chairman of Keidanren.

But in his newest position, the business mogul said he would like to “contribute to the country while I still have it in me,” touching on how JBIC can assist Japan’s export of infrastructure building or help the country secure energy resources.

The reform of JBIC and the unexpected appointment of Okuda as its new head indicate how the government intends to shift its ways of contributing to global development while also providing business opportunities abroad for domestic companies.

Originally a part of Japan Finance Corp., JBIC has provided financial resources for companies seeking to extend their business interests overseas. But in addition to Okuda’s selection, JBIC, funded 100 percent by the government, went through a makeover beginning in April and became independent from JFC.

The move came amid criticism that the financial institution lacked speed in making loan and investment decisions for domestic firms. JBIC also expanded its operations last July, when the Cabinet allowed it to work on projects in developed countries and also offer investments to Japanese companies seeking to take advantage of the strong yen.

Acquisition of natural resources, maintaining competitiveness of Japanese industries and promoting overseas business for preserving the global environment are some of its key goals, the JBIC website says.

“In the competitive market today, private companies can’t compete overseas without government support,” Tetsuo Fujita, a senior economist at Japan Research Institute, told The Japan Times.

Countries including South Korea and China have long been aware of this, and already have the public and the private sector teaming up to secure business opportunities. “Japan was slow in that aspect. But the new changes show that the government has finally come to realize the problem,” Fujita added.

One recent move by JBIC that showed its potential took place in February, when the bank said it will extend $819 million in low-interest loans to Sony Corp. so the electronics giant could take advantage of the yen’s appreciation and acquire Sony Ericsson’s mobile phone venture. JBIC also provided a loan of $600 million to Toshiba Corp. for a similar merger deal overseas.

JBIC’s job will also include tapping into the emerging economies as the domestic market shrinks due to the aging society. The bank will play a key role in helping the private sector export infrastructure to emerging economies, such as railways and electric power plants.

Finding the appropriate project to endorse and conducting negotiations overseas is where Okuda’s acute sense of business and international reputation will come in handy.

A graduate of the prestigious Hitotsubashi University, Okuda’s career included stints at Toyota in the Philippines and he also played a key role in expanding the automaker’s production base and market share in North America. He became Toyota’s chief executive officer in 1995.

Many point to Okuda’s innovative business approach, including the development and sales of the Prius, the world’s first mass-produced hybrid vehicle, as the cornerstone of Toyota’s strong run during his tenure and success in the global market.

Okuda’s appointment as head of JBIC took many by surprise, as in the past, since Finance Ministry bureaucrats have been routinely named to fill the position. Hiroshi Watanabe, a former ministry official, was a lock for the spot.

But instead, Watanabe was named vice president and Okuda took the driver’s seat.

This was seen as the government’s way of demonstrating that the financial institution needed a fresh mindset in order to compete in the global market.

Okuda is eager to get on with his job. “There will be occasions when (Watanabe) will have to assist me, but I will eventually take care of the tasks. I won’t be asking him to do it for me,” he said in his inaugural news conference.

Regarding the tasks he is set to focus on, Okuda said that export of infrastructure “is a field that Japan needs to show its presence in order for the economy to grow.” JBIC will provide loans so that domestic companies can secure business opportunities such as building water and sewage facilities in emerging economies, he added.

Okuda also said his bank is ready to capitalize on the strong yen by locking up natural energy resources overseas or supporting companies eager to merge with or acquire overseas companies.

JRI’s Fujita said the industrialist could actually change the way Japan’s cooperation and business abroad is conducted. His stint as head of Keidanren also gives him advantage in creating ties between JBIC and the private sector compared to having a former bureaucrat as the bank’s head.

While there are limits to what a government-backed bank can do, such factors will hopefully result in the introduction of some new business models and opportunities.

“Okuda’s name is known worldwide, especially since he served as the head of Toyota. That fact alone will receive a lot of attention,” Fujita explained.