The terms of the Project were to provide
a report on the Japanese money and foreign
exchange markets with particular reference
to regulatory issues, macro and micro market
structure, medium term market trends and
long term central government policy to the
Client for senior management optimum business
positioning in the markets.
Interviewees represented: providers of these services (10 foreign institutions
+ 2 Japanese institutions), operating company users (2 foreign companies
+ 12 Japanese companies), asset management- related users (3 foreign institutions
+ 4 Japanese institutions) and third party commentators (9 central government-related
+ 9 industry-related + 2 independent observers).
The methodology includes an environmental
scan with an emphasis on Japanese institutional
practices. For confidentiality reasons the
source interviews are shown with interviewee
status/affiliation generically identified.
Interviewee opinion is discussed with reference
to regulatory practice both trends and projections.
Supplementary information includes material
for readers unfamiliar with Japan.
Institutional practice is determined by the
three historical tendencies of Japan: Yamato
(frequent dissimulation), China (bureaucrat
political power) and Prussia (directed national
economic policy). The report covers dissimulation
over the banking crisis, bureaucrat politics
over financial regulation and directed national
economic policy over money + forex markets.
The banking crisis means the Japan Premium may be revisited. There is the
likelihood of an inflationary solution and a temporarily weak JPY. MoF
will continue to promote the appearance of Anglo-Saxon regulation. Money
market regulation is being modernised, but forex is remaining in Limbo:
Client appreciation of the situation appears debatable.
Comment on the Client is neither favourable
for presence nor for marketing: ".....first
tier Chase etc, second Deutsche etc, third
Barclays etc and fourth (Client) etc.....was
aggressive in marketing to (Client home country)
firms some time ago.....used from time to
time for relationship reasons only.....could
use a foreign bank such as (Client) but have
never been approached.....".
Competing providers of forex services and
third party observers see an increasingly
difficult plain vanilla market with growing
margin competition and consolidation. Value-added
solutions are required to maintain and develop
clients. Major end-client flows are required
to generate dealing profits. The smaller
foreign players must play selectively to
In general, the Client marketing strategy seems to be less pro-active than
the competition. Client administrative separations plus Head Office caution
towards Japan exposure appear to be the causes of this stance. Nevertheless,
there are novel models for exploiting Client strength in classic trade
finance services among export/import manufacturing industry.
Medium-sized manufacturing companies, the
Japanese Mittelstand, are a business possibility:
prices could be offered on the internet with
regional bank execution. Larger manufacturing
companies should be buyers of trade finance
related services offered in respect of exotic
locations. A niche service discussed would
be "straight through execution"
for such locations.
Head Office support, credit control capability,
trade finance capability and administrative
integration would provide the product for
launch of pro-active marketing. The internet
is very newsworthy and would raise the perceived
market presence. While the internet concept
is little more than low cost PR, the trade
finance concept is altogether a more substantial