Japanese Prime Minister Fumio Kishida was on the charm offensive on Wednesday, pledging further capital market reforms and promoting asset management to lure more foreign investment.
Kishida’s appearance at a conference held by Wall Street bank Morgan Stanley, where he spoke to hundreds of global investors in Tokyo, is being seen as another example of Japan’s efforts to shed a long-held image of being unwelcoming to foreign investors.
It comes as, for the first time in decades, the world’s fourth-largest economy is being seen as an increasingly attractive market for global investors as it emerges from years of deflation, and its efforts to improve corporate profits and governance bear fruit.
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The benchmark Nikkei share average shattered its all-time high this year – a once unthinkable feat – and has been climbing since. Given the country’s shrinking population, the government wants to capitalise on the wave of interest and turn itself into a global hub for the asset management industry.
“This administration is committed to furthering financial, capital market reform,” Kishida said. “We are making the promotion of asset management one of our key pillars.”
Attracting foreign asset managers is seen as crucial to shift the country’s roughly $13 trillion of household financial assets – much of it stuck in cash and lying dormant in bank accounts – into more productive investments.
As part of that, the government plans to establish special business zones for asset management firms to make it easier for them to set up in Japan and conduct business in English.
So far, Tokyo, Osaka, Fukuoka and Sapporo have submitted proposals for the zones.
Kishida told investors there would be an announcement about the government’s package on the zones in June.
Japan’s Banks Beef Up
“The asset management industry in Japan is too fragmented,” said the chief executive officer for Asia at Morgan Stanley, Gokul Laroia in an interview with Reuters.
“Consolidation of the industry, coupled with the macro tailwind is what’s going to drive it forward,” Laroia said.
Spurred on by the government’s reforms, Japan’s largest banks have rushed to beef up their own asset management businesses.
Japan’s largest lender Mitsubishi UFJ Financial Group (MUFG), which has a long-standing strategic alliance with Morgan Stanley, has said it will reallocate resources to double assets under management by 2030. MUFG owns around 23% of Morgan Stanley as of March 2023, according to LSEG data.
Rival Sumitomo Mitsui Financial Group said it planned to shift personnel to asset management from other business lines.
- Reuters with additional editing by Sean O’Meara
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