Prudential Insurance Co. of America, the largest life insurance house in the United States, will enter the Japanese financial market by jointly establishing an investment trust management firm with Mitsui Trust & Banking Co., the two companies announced Wednesday.
At a joint news conference in Tokyo, top executives of both companies expressed confidence in their business alliance to launch a new, equal partnership venture, tentatively named Prudential-Mitsui Trust Investments Co.
“This joint venture is a significant opportunity for Prudential, and we are proud to have Mitsui as a partner,” said Arthur Ryan, chairman and CEO of Prudential. “We are committed to working with Mitsui Trust to deliver the highest quality products and services to the Japanese retail market.”
Under the alliance, Prudential plans to offer a wide range of investment trust products through domestic sales channels owned by Mitsui, the third largest Japanese trust bank.
Mitsui’s distribution network and investment skills, acquired through the pension business, can help the two secure an edge over other competitors, according to Keiu Nishida, president of Mitsui Trust & Banking.
“Starting in December, commercial banks will be allowed to deal in investment trust products under further deregulation in the country’s financial system,” he said. “Consumers’ needs will become diversified, and we will offer order-made products, as well as consulting, to meet such needs.”
Ryan also expressed confidence in their strategies. “We believe in a long-term service to our clients. And we are conservative in terms of ensuring that the products that we sell meet the needs of our customers,” he said.
New Jersey-based Prudential Insurance Co., established in 1875, is the core company of the Prudential financial group, which had estimated assets of $259.5 billion as of the end of 1997. It established a Japanese branch in 1987.
Mitsui Trust was founded in 1924 as Japan’s first trust bank. With estimated assets of 12.1 trillion yen, it has 57 branches at home and five abroad.
Although initial capital for the venture has yet to be decided and its president has yet to be named, operations are expected to start within the year as soon as the venture is authorized, Nishida added.
Wednesday’s agreement is the latest in a recent series of aggressive moves by overseas financial institutions aiming to enter the Japanese market under the government’s “Big Bang” deregulation of the financial industry.
Investment trusts, similar to mutual funds in the U.S., are expected to play a growing role in managing the nation’s personal financial assets, estimated to be worth 1.2 quadrillion yen. With the joint venture, Prudential eyes to build a strong foothold here.
Prudential is particularly interested in a new high-risk, high-return pension program modeled after the U.S. 401(k) plan that is likely to be introduced in Japan in the future.
In this regard, Ryan said competition will come from domestic securities companies like Nomura and Daiwa, as well as a number of foreign companies like Merrill Lynch. “I can say that with a bit of casualness, because those are many of the same people we compete with everywhere else in the world,” he said. “We believe our approach will differentiate us. This is not simply, ‘Prudential selling product through Mitsui Trust.'”
On the current stagnant condition of the Japanese economy, Ryan offered encouragement to the Japanese people. “There is no question that the economy is going through a difficult period. One wants to see Japan return to the previous position of a very strong economy. “It’s not my position to tell people what to do, but my only advice has always been ‘faster is better,'” he said.
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