|EXECUTIVE SUMMARY: PRIVATE BANKING IN JAPAN
A large underground economy exists with various heavily discriminated communities. "Know your client" is of great importance and requires more than usual detective work, given the many social complications involved.
The bureaucracy is itself a political player in the Establishment. Breaches of the complex, compartmentalised and form-over-substance regulations may be used according to FSA internal priorities at a time of its choosing.
Reputational risk: house
NTA tax determinations often follow untransparent internal practices. Scheme-executing institutions are at high risk. Employment of NTA OB staff to maintain a secure informal communications channel is necessary.
Reputational risk: client
"Punishing one warns one hundred": clients may find their reputation damaged with admonitory tax ruling details widely publicised. Having no effective legal recourse, respectable families remain highly tax-cautious.
With a weak civil society and the unchallenged primacy of the taxing bureaucracy, vehicles for asset management administration and tax efficiency are highly restricted. Private trusts have been notably excluded.
Japan is an undeveloped market for private banking. The megabanks are hobbled by size, NPLs and generalist personnel management. Many clients require more than their one-size-fits-all financial product offerings.
Post-Bubble asset deflation impacts, enterprise succession problems and recent tax amendments are raising demand for advice on the wider menu of actions available. HNWI psychology is tending to anxiety and insecurity.
Trust Business Act
Under pressure from business interests, the Act is on fast track to an amendment effective 2004. Trust companies should then become available, subject to yet-to-be-decided licensing, after a 60 year exclusion.
There is a weakening of okami status deference: exceptionally some taxpayers will bring actions against the NTA. Financial planning advice is becoming internet accessible. Notably, paralegals are raising their profile.
Most interviewees favoured "Swiss-style" product over a negatively perceived "US-style". Also favoured were three novel channels for cost effective coverage: the internet, paralegals and second regional banking.
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