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Retail Finance in Japan

 By: Hugh Ashton
Published: April 2008

Retail Finance in Japan

Japan is the world's largest economy, with a population of over 125 million people.

This report, written by a 20 year veteran of the Japanese financial sector investigates whether or not Japanese banks are a sound investment, how to set up a retail banking operation in Japan, how to create successful product differentiation, and partnership and alliance as the best way of getting into the market.


To purchase this report, or to request a report summary or list of case studies, call Jeannie on +44 (0) 207 563 5640 or email


Also includes:

- Breaking news and careful analysis on the changing FSA regulatory guidelines and the recently-privatised Japan Post Bank.

- A comprehensive profile of players and products including the second tier of banks, largely unknown to the West, but a huge source of product marketing opportunities.

- Collected material from Japanese-language sources plus a comprehensive overview of statistics and exclusive interviews with industry experts.

Who should read this?

Executives within Retail and Investment Banking with responsibility for International marketing, Human resources international staffing issues, Risk management and Japan-specific risk assessment, and Japan-related IT issues.

What are they looking for?

Information on how to break into Japan, in particular risk, compliance, staffing, IT and an overview of Japanese banking institutions.

About the Author:

Hugh Ashton graduated from the University of Cambridge 1977 and moved to Japan in 1988. He has worked with major international investment banks and Japanese retail
banks for business continuity planning, internal policy and procedure documentation and internal audit reports. Hugh has assisted in the implementation of a special
foreign-designed retail financial outlet for a major Japanese non-bank entity together with the marketing subsidiary of a Japanese retail bank.

To purchase this report, or to request a report summary or list of case studies, call Jeannie on +44 (0) 207 563 5640 or email


The Japanese banking system is complex, with different layers of enterprises, ranging from the megabanks formed in the late 1990s and early 2000s by the merging of the city banks, together with regional banks, to labour and agricul- tural credit unions and the like. All of these entities provide some sort of retail banking services. In addition, there are various non-bank enterprises which provide some services similar to those provided by banks, e.g. consumer credit companies.

In the boom years of the 1980s, the Japanese economy floated on a bubble of inflated land prices, and the banks lent money against over-valued collateral, usu- ally in the form of real estate assets, resulting in a mountain of bad debt that remained on the banks’ books for a number of years (the “lost decade”) until the early 2000s. The cleanup of these debts and the mergers alluded to above have put the major Japanese banks on a firm financial footing once again.

The regulation of the financial services industry was carried out by the Ministry of Finance until the “Big Bang” of the late 1990s/early 2000s, when the Financial Services Agency took over this task. The FSA has achieved its first major goal of cleaning up the bad debts, and putting Japan’s financial services back on an even keel. Its next major task is the revitalisation of the Japanese financial markets by reforming regulation, and removing the straitjacket within which the industry has had to operate until recently.

It seems that the central government is sensing a wind of change blowing through Japanese businesses and the population as a whole, and has started to relax its grip on banks, among other businesses. There seems to be a very good chance that Japan will further open up to banking best practice. The recent moves and announcements by the regulatory authorities seem to signal a relaxation of the centralised iron grip over the banking industry in Japan, and the signs from the government all seem to point in the direction of welcoming foreign capital and expertise from overseas to revitalise the Japanese financial landscape.

If there is still some resentment directed against non-Japanese companies taking over businesses, such as banking, that traditionally “belong” to Japanese enterprises, this attitude is starting to become less common. For example, it was reported that at the end of 2007, foreign investors had over 5% holdings in 11 regional banks. This may not seem like a significant proportion, but it is a very substantial increase from the four banks of a year earlier in which overseas investors held more than 5%.

Japan presents its own unique social aspects that affect banking enterprises, that entrants to the market should make themselves aware of. For example:

-  The lack of personal chequing services.

-   The reliance on cash as a payment method.

-   The saving habits of individuals within Japan.

-   The problems related to personal names in Japan, which can lead to com- pliance, legal, and even reputational issues in cases of identity theft, etc.

Though there are relatively few bank branches in Japan, banks’ customers are served by networks of ATMs that provide a full range of services and are located outside the banking network, in convenience stores and shopping centres that provide some opportunities for entrants to the Japanese banking scene...


1. Introduction — The structure of Japanese banking
Megabucks and city banks
Regional banks
Credit associations and agricultural banks
Online and "new" banks
Foreign banks
Japan Post Bank
Credit institutions
Brokers and fund managers

2.  Japanese banking — a brief history
The land bubble
The "lost decade"
The banks and retail banking

3.  The influence of regulation
The deposit insurance cap
Moves away from regulation to guidance
Further thoughts on deregulation
International associations
The personal Information Protection Law

4.  Some aspects of Japanese society
Cash-based society
Banking habits
The feminine touch
Where's my cheque book?
Signed or sealed?
Japan saves
Geographical differences within Japan
The hierarchy of Japanese society

5.  Is Japan overbanked?
The customer experience of Japanese retail banking
Branch design
Promoting the bank's brand
The role of the ATM in Japanese retail banking
Retail banking services outside banks

6.  I want to be a loan
Credit bureaux
Consumer finance organisations
Credit cards

7.  Payment instruments
Electronic money
Debit cards

8.  Other products
Non-account products

9.  Retail bank-related crime and fraud in Japan
Organised crime

10. Staffing issues
Part-time and temporary workers
Using the forgotten 50%
It and the Indian connection

11.  IT Considerations
IT regulation and best practices
Internet and remote banking
Disaster recovery and business continuity

12.  Case studies
Japan Post Bank - possible windows of opportunity
Japan Post Bank its rivals
Bank of Yokohama remote banking
Citibank Japan


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