Financial services to Japan
(Last updated: 23 Aug 2013)
Trends and opportunities
The market
Japan has the second largest pool of investable wealth in the world. In March 2013, assets held by Japanese households were valued at JPY1,571 trillion (A$17.4 trillion) of which 54 per cent were bank deposits, 7.9 per cent equities, 4.5 per cent unit trusts and 2.1 per cent fixed-income (source: Bank of Japan).
Japan's rapidly ageing population and future pension requirements are driving investors towards higher yield products such as managed investment trusts, representing an opportunity for Australian fund management firms. Currently only 20 per cent of total Japanese held financial assets are managed by asset management firms, with the majority of assets invested in conservative options such as bank deposits and government bonds (source: Price Waterhouse Coopers).
The Abe Government elected in December 2012, has advocated ‘Abenomics’ as the government’s strategy to revitalise the Japanese economy through the three priorities of fiscal expansion, monetary expansion and structural reform.
Confidence is returning to the market following large scale quantitative easing, although a high degree of uncertainty still remains over European debt issues and the momentum of growth in emerging markets. According to the Bank of Japan (BOJ)’s Report on Currency and Monetary Control, Japan's economy has strengthened and is expected to return to a moderate recovery path in 2013 with resilient domestic demand and the gradual acceleration of economic growth in international markets.
Due to the accommodative financial conditions instigated by ‘Abenomics’, the Nikkei index soared 54 per cent in the second quarter of 2013, the highest increase on record over the last 60 years. The buoyant Nikkei has stimulated consumer spending, which increased one per cent in the six months from November 2012.
(Source: Nikkei)
Merger of Tokyo and Osaka stock exchanges and with new infrastructure funds exchange planned
To strengthen their position as one of the largest stock markets worldwide, the Tokyo Stock Exchange (TSE) and Osaka Stock Exchange (OSE) merged their cash equity markets in July 2013, and will subsequently merge their future markets in March 2014. The TSE is also planning to launch a new exchange for Infrastructure investment products such as funds, trusts and bonds by 2015.
Shift by Japanese pension funds to alternative investments
The Japanese Government Pension Investment Fund (GPIF) is one of the world’s largest institutional investors, managing over JPY130 trillion (A$1.4 trillion) as at the end of March 2013. GPIF has traditionally taken a conservative investment position. The GPIF’s current investment position is allocated as domestic fixed-income (60 per cent), domestic equity (2 per cent), foreign fixed-income (11 per cent) and foreign equity (12 per cent). Recently, GPIF has taken steps to consider a more proactive investment position, including research into alternative investment strategies commissioned in late 2012. The Abe Government has also announced the formation of an expert council to discuss the governance and investment positions of GPIF and other government investments.
Another major Japanese pension fund is the Pension Funds Association (PFA), which manages over JPY10.7 trillion (A$118.8 billion) as at the end of March 2013. PFA has begun to invest in alternative asset classes through joining the Global Strategic Investment Alliance together with Mitsubishi Corporation, Mizuho Bank, Japan Bank of International Cooperation and Canadian pension fund OMERS in April 2012. This group made its first major infrastructure investment into a US power project in July 2013.
Promoting a shift from bank deposits to investments
The Japanese Government will launch a new tax exemption scheme called Nippon Individual Savings Accounts (NISA), which is similar to the UK’s Individual Savings Accounts from 2014 to encourage a shift from bank deposits to investments. The NISA scheme will allow tax exempted investment accounts of up to JPY1 million (A$11,000) in value for a maximum five years, with a total value of multiple accounts of JPY5 million (A$55,000). The Government expects NISA accounts will increase in value to JPY25 trillion (A$275 billion) by 2027.
(Please note: all A$ values are calculated on the basis of exchange rate of JPY90=AUD1)
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 licences through the Japanese Government is required to provide financial services in the Japanese 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 enter the Japanese market. Austrade can assist Australian firms to conduct market research to evaluate market entry strategies and identify strategic Japanese partners and distributors for financial services products such as managed funds.
Links and industry contacts
Government, business and trade resources for Japan
The Commodity Futures Association of Japan – www.nisshokyo.or.jp/index.html (Japanese only)
The Financial Futures Association of Japan – www.ffaj.or.jp/en/index.html
Foreign Non-Life Insurance Association of Japan – www.fnlia.gr.jp/english/
The General Insurance Association of Japan – www.sonpo.or.jp/en/
International Bankers Association – www.ibajapan.org/
The Investment Trusts Association, Japan – www.toushin.or.jp/english/
Japan CTA Association – www.jade.dti.ne.jp/~jca/eindex.html
Japan Financial Services Association – www.j-fsa.or.jp/index.php (Japanese only)
Japan Securities Dealers Association – http://www.jsda.or.jp/en/index.html
Japan Securities Investment Advisers Association – http://jsiaa.mediagalaxy.ne.jp/index_e.html
Japan Venture Capital Association – www.jvca.jp/english/
Japanese Bankers Association – www.zenginkyo.or.jp/en/
The Life Insurance Association of Japan – www.seiho.or.jp/english/index.html
Regional Banks Association of Japan – www.chiginkyo.or.jp/01_gaiyou/index_e.shtml
The Second Association of Regional Banks – www.dainichiginkyo.or.jp/en/index.html
Trust Companies Association of Japan – www.shintaku-kyokai.or.jp/html/trustbanks/e_1.html
Regulators
Bank of Japan – www.boj.or.jp/en/index.htm
Financial Services Agency – www.fsa.go.jp/en/index.html
Securities and Exchange Surveillance Committee – www.fsa.go.jp/sesc/english/index.htm
Stock exchange
Osaka Securities exchange/JASDAQ – www.ose.or.jp/e/
Tokyo Financial Exchange Inc – www.tfx.co.jp/en/index.shtml
Tokyo Stock exchange – www.tse.or.jp/english/index.html
Media
Nikkei – www.nni.nikkei.co.jp/e/fr/freetop.aspx
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.