Coming to terms with Big Bang
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Coming to terms with Big Bang

With Japan's financial deregulation gathering pace - and foreign players emerging as the clear winners - Japanese institutions have been slow to formulate defence strategies. Some see their salvation in growth areas such as investment banking and asset management. But as Jack Lowenstein reports, their real future may lie in linking up with outsiders. And foreign acquisition of Japanese firms may not be far off.

Foreign banks are expected to be big winners from the reforms sweeping Japan's financial sector. This is not least because they are reckoned to be more adaptable than Japanese firms because of their experience of other deregulated markets and more flexible cost structures. "It is very easy for foreign financial institutions to make money in Japan," says UBS Securities senior analyst Yukiko Ohara. "They are much more focused on return ratios, on getting value from unprofitable clients, and they have the technology to survey and maximize their profitability."

Certainly there are signs of an upturn of interest in Japan from foreign institutions after almost a decade in which the trend has been towards withdrawal. One indicator of this is an increase in the number of foreign bankers employed in Japan.

Even firms which had previously written Japan off are swallowing their pride and rethinking their strategies. In January, for example, County NatWest repurchased membership of the Tokyo Stock Exchange (TSE), having abandoned it less than four years earlier. After bottoming out in 1995, the price of seats on the TSE has risen sharply. "Japan is flavour of the month again," says Jacques d'Estais, general manager of Paribas Capital Markets' Tokyo branch.

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