The Survival Strategies of Japanese Financial Institutions during the Recession (2)

 The fact that negative interest rates have been imposed on the two megabanks every six months for the first time in six years means that loans are not increasing enough despite the continued massive quantitative easing. In other words, there is a lack of demand for funds in the economy. The reason for the lack of demand for funds is that investment and consumption do not live. Investment and consumption are not living because the outlook for the future is uncertain. Consumers in Japan, whose population is declining and aging is serious, close their wallets even with a small shock. The contraction of domestic demand reduces the willingness of companies to invest. It is a chronic disease of Japan that has been constantly afflicting the Japanese economy since the collapse of the bubble.

Japan has already started a zero-interest-rate policy in 1999 that lowers policy interest rates by nearly 0%, experimented with the world's first quantitative easing policy in 2001-2006, and began a bolder quantitative easing policy in 2013. Interest rates have been extremely lowered due to the quantitative easing policy, but there has been no significant change in the demand for funds from households and companies. Japan's loan-to-deposit ratio, which stood at 1.5% in the mid-1990s, fell to less than 1% in 2012, and recently, it is only 0.56%.

Japan's financial institutions had to struggle to survive the poor conditions. The first strategy of the Japanese financial institution for survival was to expand overseas with Japan's abundant funds. Mitsubishi UFJ Financial Group's acquisition of CNS in June this year is only an extension of its continuous overseas market development. The number of overseas employees of Mitsubishi UFJ Bank under the group is already 25% of the number of domestic employees in Japan. The overseas market now accounts for nearly 45% of Mitsubishi UFJ Group's total profits. It is also the group that holds a 21.5 percent stake in Morgan Stanley, a global financial institution.

Although the proportion of the U.S. and China is still large and the proportion of Southeast Asia is insignificant, Japanese financial institutions are expanding their investments in Southeast Asia, which is expected to grow in the future. In particular, Thailand has the largest trading volume in Southeast Asia, with the stock market trading amount of about 55 billion won. Mitsui Sumitomo Group, which has a relatively weak share (36%) of overseas markets, decided to invest in financial institutions in Vietnam, the Philippines and India in 2021 alone. Nomura Securities, which sold CNS, is also not withdrawing from the Thai market. It is a requirement to focus on business and corporate transactions with the wealthy. The overseas market accounts for nearly 40% of Nomura Holdings' profits.

Another survival strategy following entry into overseas markets is the expansion of customers or the creation of new services through the linkage of different financial businesses. It is already a familiar strategy in the Korean financial market, but it can also be seen as different from Korea. One of them is to link banks and securities businesses in overseas markets. The aforementioned acquisition of CNS by Mitsubishi UFJ Group was made through Ayutthaya Bank, which the group acquired in 2013. Ayutthaya Bank is known as a securities company with a strong position that ranks fifth among Thai banks in terms of assets, and CNS is known as a securities company with strong Internet sales of investment trusts. Mitsubishi UFJ Group's goal is to expand its personal securities business in Thailand by utilizing the bank's customer base.

The other is the business partnership between large securities firms and local banks. In Japan, business partnerships between banks and securities have been the subject of regulation. This is to prevent banks that have superior status to companies as suppliers of funds from exerting undue pressure on companies in relation to securities business. For example, a client bank can put pressure on a company ahead of the issuance of corporate bonds to use a specific securities company as a chief executive. However, it is true that in Japan, where the demand for funds has shrunk, the number of companies with virtually little borrowing has increased, and the superiority of banks has also weakened a lot. On the other hand, a partnership between banks and securities will enable new services to companies' financial strategies. For example, depending on the financial situation of a company, a better alternative may be proposed: bank loans or corporate bond issuance. Eventually, the Japanese government decided to ease previous regulations on business partnerships between banks and securities.

In particular, local banks, which are threatened by their survival in an environment where the local population is rapidly decreasing, are active in collaboration with large securities firms. Fukui Bank decided to transfer its securities customer accounts to Nomura Securities and use its local customer network to sell Nomura Securities' financial products. An employee of Nomura Securities will also be assigned to Fukui Bank to support its work. In fact, business alliances between Nomura and local banks have already begun in 2020, and Fukui Bank will be the fourth partner. Nomura, a subsidiary of the group and does not have a bank, can utilize the customer base of local banks, and local banks can utilize Nomura's financial products and customer services.

The third strategy of Japanese financial institutions to survive the recession is the development of new financial instruments. Japan is a society in which the youth population decreases every year. The population in their early 20s, which was 10 million in 1995, fell to less than 8 million in 2003, and is now around 6 million. Not only is the youth population decreasing, but the proportion of drivers with licenses is also decreasing in the current youth generation. The number of people driving cars is rapidly decreasing. This means a reduction in the auto insurance market, which was a large part of the profits of insurance companies. Instead, as the future outlook becomes uncertain, more and more young people are interested in pension insurance. Japanese financial institutions are also risking their lives to develop new products and services that can target these young consumers.

Mitsui Sumitomo's investment in SBI and Tokyo Marine Insurance's start to sell insurance at Amazon Japan also means entering the Internet and digitizing, but it is also part of providing new services to target young customers.

It is known that major customers of SMBC Nikko Securities under Mitsui Sumitomo Group are in their 50s or older, while SBI Securities is known to have about 40% of those in their 20s and 30s. SMBC Nikko Securities wants to increase its contact points with young customers through links with SBI. Tokyo Marine Insurance Co., Ltd. uses Amazon Japan to reach young people who are unfamiliar with insurance. It is also possible to utilize the existing customer information in Amazon Japan as it is, pay insurance premiums through Amazon Pay, and receive insurance 구로셔츠룸 money as Amazon gift certificates if desired.

In addition, cyber insurance and drone insurance are sold. Cyber insurance is insurance against various risks such as data loss on the cyber and slander or serious injury on the cyber. Drone insurance is an insurance against damage or injury that occurs during drone operation. It is known that insurance design is also in progress in preparation for accidents of self-driving cars.

The reality facing Japanese financial institutions is still harsh. As long as the population decreases and low growth continues, interest rates in Japan are bound to be lower than in other countries. There are still a lot of tasks in digital, fintech, and AI utilization. Although investment in overseas products is increasing due to the reduction of the domestic market, it is never easy for small financial institutions that have not accumulated experience. As of the end of June this year, there were reports that foreign securities and investment trust valuation losses at 99 local banks in Japan exceeded 1 trillion yen. This is because bond prices have fallen in the aftermath of a global rate hike. Therefore, in order to survive, we need to keep our antennas close to market 해외축구중계 trends and strive more than we have tried so far.

The reality facing Korean financial institutions is never easy. Interest rates are rising due to inflation, and the difference in interest rates on loans is more affordable than in Japan, but Korea is also a country with a declining population. The real estate market will never be good either. If the demand for funds 믈브중계 shrink due to the shrinking domestic market, it will be in the same position as Japan. Analyzing the strategies of major Japanese financial groups, which already earn nearly half of their profits overseas, there will be many implications for applying them to Korean financial institutions.