TOKYO - Mizuho
Corporate Bank's decision to invest 130 billion
yen (US$1.2 billion) in Merrill Lynch & Co
could signal the beginning of a role reversal
between Japanese and overseas financial
institutions.
Having completed repayment
of public funds following the cleanup in the wake
of the mid-1990s bubble, Japanese banks are
focused on bolstering their financial bases. On
the other hand, European and US banks, which until
recently had pursued investments, have seen their
equity capital erode due to the effects of the US
subprime mortgage crisis.
Whether Japanese
banks will be able to take advantage of the
investment opportunities
before them will be a test of their operational
skills and guts. Even so, they appear increasingly
willing to look outwards, with Nomura Holdings,
for example, recently discussing a cooperation
plan between the group and Vietnam's State Capital
Investment Corporation (SCIC).
Faced with
a major post-bubble economy cleanup, Japanese
banks scaled back their overseas operations
starting in the mid-1990s. The moves were a far
cry from the 1980s, when the country's banks
snapped up overseas financial institutions.
History has shown that countries in the middle of
an uptrend in the credit cycle will plug their
money into global financial institutions that need
to bolster their credit.
But this time
around, sovereign wealth funds from China and
Singapore as well as the Middle East have played
that role, taking major stakes in US and European
institutions to shore up their finances.
Until now, Japanese banks had stayed on
the sidelines. This is because their share prices
suggest they are still far from a full-fledged
recovery. In fact, Mizuho Financial Group's share
price on Tuesday was hovering near a low before
the news of its plan to invest in Merrill Lynch.
Business leaders at the nation's megabanks,
however, are growing confident.
"There are
more investors willing to provide the funding as
long as it's a good purchase," says a senior
executive at a major bank.
Opportunities
to invest in European and US financial
institutions are expected to continue over the
near term. But unless Japanese banks can show they
can hold their own against their foreign
counterparts, the stock markets are not likely to
look on them kindly any time soon.
Meanwhile, opportunities are emerging in
Asia's developing economies. Japan's leading
financial group, Nomura Holdings, recently held a
working session with Vietnam's Finance Minister Vu
Van Ninh to discuss cooperation with SCIC.
According to Minister Ninh, SCIC and
Nomura in 2007 signed a memorandum of
understanding (MoU) to boost cooperation in
improving management capacity, professional skills
and personnel training.
Minister Ninh, who
is chairman of the SCIC Management Council, said
he hoped to see closer ties between the two sides
in order to find effective models and methods in
capital utilization for Vietnamese state-owned
businesses and to improve management capability
for staff of the SCIC and businesses.
Nomura's senior managing director
Yoshinori Go said that under the MoU, Nomura had
held a training course for SCIC staff. He said the
two sides should form a daily connection for more
effective cooperation.
He expressed his
hope to see SCIC develop into a big group as
Singapore's Temasek in the next five to 10 years.
Nomura, which provides financial solutions
for businesses over the world, set up in Vietnam
the Nomura Hai Phong Industrial Zone with 90% of
its acreage leased out.
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