Financial services in Japan

The industry which has a range of businesses that deal with money like banks, insurance companies, accounting companies, finance companies, taxation, investment funds, credit companies, and few government enterprises is called the finance industry. The activities or services within this industry that cater to the economy of the country are called financial services. Therefore, the economic services provided by the finance industry in Japan are called financial services in Japan. These services are present across the world, at regional, international and national level developed economic and demographic regions such as Sydney, New York, London, Tokyo, etc.[1]

Japan being one of the worlds' major industrialised countries, its major financial bodies are commercial banks, Japan also has foreign exchange companies, securities, and capital markets. The government-owned institutions inject funds into the economy and money markets for liquidity and also help the Bank of Japan to apply the monetary policy.[2]

History of Japanese currency and Currency exchange

The currency of Japan is Japanese Yen, and the Japanese Yen to European pound exchange rate is the most popular. JPY is the code of the currency and ¥ is the symbol of the Japanese Yen. The minor unit of Japanese Yen is 1/100 which is called a Sen. The central bank rate is -0.10. JPY's inflation rate is 0.50% presently (subject to change as the market is constantly changing). The currency denominations in coins are ¥1, ¥5, ¥10, ¥50, ¥100, ¥500 and the notes are ¥1000, ¥5000, ¥10000 and ¥2000 which is rarely used. Japan's central bank is the Bank of Japan. Japanese Yen is the most traded currency in Asia, and third in the world the reason being its relative lower interest rates. When a currency with a low-interest rate is sold to buy a currency with a higher rate of interest it is called a carry trade. Therefore, the Japanese Yen is mostly used to carry trade with the U.S. Dollar and the Australian Dollar.[3]

Currency exchange counters can be found in almost every major airport. Japan is a cash-based society and value a weighted wallet. However, you can use an international credit card for transactions like taxis, train tickets, and few other services[4]

Banking

Banks form the major and most important part of the financial services of Japan. The Banking system in Japan can be divided into commercial banking system and Investment banking system.

Commercial banking

The commercial banking industry is deal more directly in terms of saving and lending of money whereas the financial services also have insurance, risk distribution, investments, etc. the commercial banking sector issues debit and credit cards, keeps deposits and lends money to the general public. It largely deals with the general public. The main revenue system of the banks would be through the interest rates on the credits, fees, commission, and rates paid to the depositors.[5]

Investment banking

The investment banks facilitate buying and selling stocks, wealth management, and tax advice, merger and acquisition advice, etc. These banks are usually not for the general public but the high net worth customers and high deal-making institutions.[5]

Issues in the Japanese financial sector

Skill development policies

Due to the 2008 financial crisis, the skill development programs initiated by the firms specifically have been drastically reduced. Also, because the Japanese financial institutions have long skill training sessions, the employee attendance ratio has decreased due to which the institutions now have to hire only a few employees.[8]

The female labour force in the Japan labour market

Significant attention has been given to the female employees as there were labour shortages and aged society. The financial sector uses female labour more than any sector in Japan. In the financial sector as there is more female labour under the age of 34–44. However, in this age group, female regular employees decline due to maternity reasons. Therefore, financial institutions might need to assist female workers in the workplace to continue their jobs even after their maternity period.[8]

The mental health of the financial sector employees

Insurance

Due to the Great East Japan Earthquake, the 2008 financial crisis and the September 11 attacks, in the financial years of 2001–02, 2008, and 2011, the Japanese insurance industry has shown losses. However, except these years, it has shown extraordinary performance since 2000 while earning net and ordinary profits every year. Besides these, the Japanese insurance core underwriting operations have not been very great and profitable.[9]

In Japan, the demographic variations, the likelihood of an increase in frequent natural disasters, consumer behaviour change responses are a few of the changing factors in the insurance industry environments of Japan. These changes imply that the future of the insurance industry business can be sustained by the personalisation of insurance industry products, building a cross-sectoral ecosystem, and tackling the challenges in redesigning the human role in the insurance industry.[9]

The Japan insurance industry is amongst the world's largest insurance markets, with its volume of 35 trillion Japanese Yen which bags the second position after the United States in the annual premium. As the ageing population is rising, birth rates lowering and the interest rates also lowering the life and non-life insurances face tremendous challenges in the market of Japan.[10]

Foreign companies and banks in Japan

There are over 50 foreign banks in Japan, including Citibank, JPMorgan Chase, HSBC, Deutsche Bank, Credit Suisse, ABN AMRO, ING Group.

There are several foreign financial services companies and banks assisting Japan's financial services industry. Few of those companies include KPMG, Deloitte, PwC, etc., and banks including Bank of China, Bank of Taiwan, etc. For example:

KPMG - KPMG in Japan with its experience in assisting various financial organisations in and outside of Japan helps its clients to prosper in their business goals in and out of the Japanese market. Its services include audit & assurance, legal, risk, financial, consulting, and tax advisory, etc.

References

Finance & Development Finance & Development, retrieved 2020-05-31^
About this Collection Library of Congress, retrieved 2020-05-31^
JPY - Japanese Yen rates, news, and tools www.xe.com, retrieved 2020-05-29^

Major banks in Japan

Mitsubishi UFJ Financial group – this group has been founded in 1880, its main operations are done through retail banking, corporate banking, trust assets, and global business groups. It has an asset of US$2901 billion and US$14 billion of income as of 2016. It has an employee strength of 140000 and is present in 50 countries across the world.[6]

Japan Post Bank – this bank serves the corporate and retail clients in Japan and across the world. It has an asset of US$714.4 billion and US$3 billion of income as of 2016.[6]

Mizuho Financial Group – this bank provides financial and banking services through various business sectors like the retail and business; corporate and institutional; global markets, etc. It has an asset of US$400 billion and US$5 billion of profit as of 2016.[6]

Likewise, there are other city, regional, and trust banks that provide various services in the banking industry of Japan like Sumitomo Mitsui Financial Group, Norinchukin Bank, Resona Holdings, Concordia Financial Group, Fukuoka Financial Group, Chiba Bank and Hokuhoku Financial Group, etc.[6]

However, according to the report on the Financial Services of Japan 2019/2020, banks' earning power has been lacking in Japan, the city banks are not rising so banks are accelerating the business model to be rebuilt for businesses.[7]

Japanese law defines several types of financial institutions:

Both Japanese and foreign citizens may apply for an international ATM card corresponding to an interbank network such as Cirrus or PLUS. Foreign citizens need to show the Alien Registration Card for account creation.

Interbank ATMs are common throughout the country, especially in densely populated urban areas.

The central bank, currently the Bank of Japan.

Commercial banks, divided into three types:

Long-term credit banks, a defunct classification

Trust banks

Ordinary banks, divided into four types:

Money center banks, those headquartered in Tokyo or Osaka and serving the entire country of Japan. Following the industry consolidation of the 1990s, this sector currently consists of three "megabanks" (Bank of Tokyo Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho Financial Group) and three smaller banks (Aozora Bank, Resona Holdings and Shinsei Bank)

Regional banks

Secondary regional banks

Other banks, comprising a number of unofficial categories including: