Financial services to Japan
(Last updated: 16 Oct 2014)
Trends and opportunities
Japan has the second largest pool of investable wealth in the world. Assets held by Japanese households were valued at JPY1630 trillion of which:
- 53 per cent were bank deposits
- 9.1 per cent equities
- 4.8 per cent unit trusts
- 1.8 per cent fixed income.
(Source: Bank of Japan, Guide to Japan’s Flow of Funds Accounts, Mar 2014).
Financial conditions among firms and households have become more accommodative under quantitative and qualitative monetary easing (QQE) and related economic revitalisation strategies of the current Abe Government known as Abenomics. Funding conditions have improved not only for large and medium-sized firms, but also for small firms and interest rates on housing loans have declined.
The recent economic recovery in 2014 has had positive effects on the profits of financial institutions, which include an increase in profits related to equity investments and sales of equity investment trusts and a decrease in credit costs. For securities investments, investment in instruments such as foreign securities and equity investment trusts has increased, albeit slightly.
Meanwhile, no major changes have been seen in investments other than by financial institutions, such as insurance companies. However, assets under management of investment trusts are expected to increase if NISA (Nippon Individual Savings Accounts), an investment incentive savings account through tax exemptions introduced in 2014, continues to encourage individual investors’ investment in Japanese equities and mutual funds.
Japanese pension funds increase alternative investments
The Japanese Government Pension Investment Fund (GPIF), the world’s largest pension fund with assets under management of over JPY127 trillion as at June 2014, is taking measures to shift their asset allocation strategies to better match their long-term pension liabilities.
In October 2014, the GPIF announced a change to its investment portfolio allocation, decreasing domestic fixed-income from 60 to 35 per cent and increasing the:
- share of domestic equities from 12 to 25 per cent.
- foreign fixed-income from 11 to 15 per cent.
- foreign equities from 12 to 25 per cent.
The GPIF also clarified, for the first time, its investment allocation target in alternative assets such as infrastructure, private equity and real estate, which will comprise up to 5 per cent of total assets (Source: The Japanese Government Pension Investment Fund (GPIF), Investment results for the first quarter of fiscal 2014（revised) and Adoption of New Policy Asset Mix, Oct 2014).
In alternative investments, GPIF has entered into a co-investment agreement with the Development Bank of Japan (DBJ) and the Ontario Municipal Employees Retirement System (OMERS) to jointly invest in infrastructure assets. GPIF and DBJ will have exposure to those infrastructure assets sourced by OMERS through a unit trust, which will be managed by Nissay Asset Management.
Such investments will be made through an approximate five-year investment period and the aggregate investment outstanding may reach up to JPY280 billion, which would account for 0.2 per cent of total assets under management of JPY127 trillion (June 2014).
Australian financial services firms in Japan
Macquarie Capital, AMP Capital, First State Investments and IFM Investors have established a presence in the market targeting Japanese institutional and retail investors. The Commonwealth Bank, National Australia Bank and ANZ have branch offices located in Tokyo.
Tariffs, regulations and customs
The financial services sector in Japan is highly regulated, with relevant laws including the Banking Act, Financial Instruments and Exchange Act (regulating various financial products and services including funds) and the Insurance Business Act. The acquisition of financial licenses through the Japanese Government is required to provide financial services in the market.
The Financial Services Agency in Japan oversees the operation of financial markets and firms in banking, securities and exchange and insurance.
Marketing your products and services
Austrade is well placed to assist Australian financial services firms to enter the Japanese market. Austrade can assist Australian firms to conduct market research to evaluate market entry strategies and identify strategic partners and distributors for financial services products such as managed funds.
Links and industry contacts
Government, business and trade resources
The Commodity Futures Association of Japan (Japanese only)
The Financial Futures Association of Japan
Foreign Non-Life Insurance Association of Japan
The General Insurance Association of Japan
International Bankers Association
The Investment Trusts Association, Japan
Japan CTA (Commodity Trading Advisors) Association
Japan Financial Services Association (Japanese only)
Japan Securities Dealers Association
Japan Investment Advisers Association
Japan Venture Capital Association
Japanese Bankers Association
The Life Insurance Association of Japan
Regional Banks Association of Japan
The Second Association of Regional Banks
Trust Companies Association of Japan
Japan Private Equity Association
Japan Pension Services
Bank of Japan
Financial Services Agency
Securities and Exchange Surveillance Committee
Osaka Securities exchange/JASDAQ
Tokyo Financial Exchange Inc
Tokyo Stock exchange
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.
The Australian Trade Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:
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