Against a backdrop of startling international developments, such as Brexit and the Hong Kong protests, Japan’s financial sector is uniquely positioned to step out of the shadows of its competitors in Singapore and Hong Kong.
This is the assessment of The Organization of Global Financial City Tokyo — also known as FinCity.Tokyo — which, on March 19, held its FinCity Global Forum at the Grand Hyatt Tokyo in Roppongi to explore the opportunities and challenges that await Japan in its pursuit to become a top global financial hub. Established in April 2019, FinCity.Tokyo is an organization that promotes Tokyo as a global financial hub and supports foreign financial services firms set up in Tokyo.
In addition to the keynote and other speeches, the forum consisted of a series of panel discussions that invited industry veterans to discuss a wide array of topics, ranging from regional revitalization and socially oriented asset management to competition and collaboration among international financial cities.
The first panel, centered on the theme of “Advancement of the Asset Management Industry and Global Financial City Initiative,” invited panelists Yasumasa Tahara, director of the strategy development division at the Financial Services Agency; Kazuhide Toda, managing executive officer and chief investment officer at Nippon Life Insurance Company; and Oki Matsumoto, chairman and CEO at Monex Group Inc., to share their thoughts on how the industry can improve its asset management environment.
One of the major topics discussed during the panel was the importance of cultivating an investment culture among private citizens. Matsumoto observed that, unlike in the U.S., investment in Japan is solely focused on investment by companies and does not have a culture of private investors who participate in the industry by directly buying stocks. The panelists agreed that cultivating such a culture and improving financial literacy will be one of the keys to creating an environment that produces skilled investors who can strengthen Japan’s investment chain.
These observations on Japan’s investment culture transitioned to another topic discussed by the panel — personnel. Tahara discussed the importance of diversifying the workforce of Japan’s financial sector by bringing in women and foreign nationals, while Toda noted the need to recruit personnel capable of perceiving invisible risks not yet quantifiable by financial technologies. Matsumoto observed that the biggest challenge in addressing personnel is the generational gap between regular employees and upper management.
He stated that, rather than recruiting women and foreign nationals straight out of university as entry-level employees, Japanese firms should focus on shaking up upper management by introducing managers with diverse backgrounds and work styles who are capable of using innovative technologies to lead a new generation.
The second panel focused on the topics of “Regional Revitalization Through Asset Management and Solving Social Issues” and featured panelists Yoshi Kiguchi, chief information officer of the West Japan Machinery Pension Fund; Ken Shibusawa, CEO of Shibusawa and Company Inc.; and Manabu Sato, president and representative director of Regional Revitalization Solution.
Central to the panel’s discussion was Tokyo’s role as a hub that facilitates investments to outlying regions. The panel noted that Tokyo’s role is especially important in light of the novel coronavirus, which is projected to deal as great a blow to the global economy as the economic downturn triggered by the bankruptcy of Lehman Brothers in 2008, and paralyze Japan’s tourism industry. Shibusawa stated that, in order to develop a financial ecosystem in which a strong Tokyo circulates funds to peripheral areas, the country needs to adopt a “Made with Japan” model — an evolution from the “Made in Japan” and subsequent “Made by Japan” models — to encourage international partnerships that facilitate international investment into the country.
The final panel focused on “balancing competition and collaboration among international financial cities.” Moderated by Keiichi Aritomo who is FinCity.Tokyo’s executive director, it featured panelists Jochen Biedermann, managing director of the World Alliance of International Financial Centers (WAIFC); Hubertus Vaeth, managing director of Frankfurt Main Finance; and Gary Stanton, secretary general of the International Bankers Association of Japan.
FinCity.Tokyo and Frankfurt Main Finance are partners of WAIFC, and both Biedermann and Vaeth traveled to Tokyo from Europe amid the COVID-19 pandemic, reflecting the importance the alliance places on its relationship with Tokyo. Biedermann and Stanton discussed how, going forward, governments will need to explain to citizens why certain market participants may have to be bailed out due to the economic impacts of the virus, by providing liquidity to prevent financial crises.
Vaeth pointed to the virus as an example of an “unknown, unknown” risk, due to its ability to mutate, as opposed to “known risks” and “known, unknown” risks, and how it highlights the importance of stable insurance structures in Japan. Stanton connected this observation to Japan’s strength as a country that features one of the world’s most liquid markets and where the government and market work closely together during crises.
FinCity. Tokyo is an ambitious attempt by veterans of Tokyo’s finance sector in examining the city’s future role as a global financial hub. This article, the second in a three- part series, outlines the group and its goals.