Taiki 3573

Japan as a financial hub and its benefit to the household assets

Tokyo metropolitan government and Japanese government have taken some measures for the ambition of becoming a financial hub. Japan has been left behind Hong Kong and Singapore over the last few decades, however, wants to get it back sensing that rival Hong Kong has been weakened by its political turmoil. They want to invite international investment managers and fintech firms.

I think the key for Japan to success lies in whether we can create synergy between the international financial companies and abundant personal financial assets so that both can benefit from each other.

Needless to say, there are benefits for Japan from becoming a financial hub. First, it should stimulate Japanese economy by inviting risk money from overseas. And also Japanese citizens may be able to benefit from the financial hub, which may provide better options for their wealth management and consequently make money for them.

For overseas financial companies, there should be considerable financial benefit in order to decide to spend money and resource to enter into Japan.  There are some difficulties of Japan including the language barrier and its tax system, although those are recently taken care of by new policies. Then, what would be the advantage of Japan? While HK has its advantage of being a gateway to China, Japan has rich household assets. It should incentivize overseas companies if they can access to them.

However, Japanese financial regulations are currently not very easy to access to the household assets. While it is relatively easier to conduct business for professional investors only, the licenses to distribute financial products or manage money for retail investors are hard to get. The organizational and capital requirements for new financial startups are considerably high. It may be reasonable and preferable for the purpose of investor protection (e.g., to avoid fraud). But at the same time, the difficulty may also prevent good emerging managers and international investment managers who wish to start small from doing so.

It may be necessary for Japan to accept the overseas investment products that may look a bit risky and complicated, but good and high quality. Then I believe we can create upward spiral between the international financial companies and Japanese abundant personal assets so that both can benefit from each other.