Foreign banks galloping into Japan 'Wild West' - "just the tip of the iceberg"
TOKYO, May 24 (Reuters) - European and U.S. brokerages and banks are pouring resources into Japan as they seek to take advantage of financial sector deregulation, despite concerns over a sluggish economic recovery.
In the past few days, Goldman Sachs (GS-N) , J.P. Morgan (JPM-N) , Lehman Brothers (LEH-N) State Street Bank and Standard Chartered Bank have all said they will increase investment services and staffing in Japan.
Analysts reckon that is just the tip of the iceberg.
"This trend will definitely continue. It's like the Wild West -- and some firms are coming in with both guns shooting," said James Fiorillo, banking analyst at ING Barings Securities.
"Irrespective of views on the economy (and) a slowdown in banking reform, Japan's Big Bang financial deregulation is on track and opening up opportunities for growth and profitability."
Saturation in their home markets, debt burdens continuing to weigh on the operations of Japanese brokerages and banks, financial deregulation in Japan in 1998 and the large savings of Japanese individuals is enticing foreign firms.
They are focusing on investment banking, e-finance, asset management and derivatives.
Two top U.S. investment banks on Tuesday announced they would expand their business in the Japanese government bond (JGB) market by offering Internet-based trading systems in Japan.
Goldman Sachs and J.P. Morgan said they will launch the real-time trading system in June and July respectively for their institutional clients.
U.S. investment bank Lehman Brothers said last week it too was expanding its fixed-income division in Japan.
In the Samurai bond market, which is recovering from a two-year slump, Merrill Lynch (MER-N) this week served as co-lead manager on a deal worth 60 billion yen by Argentina and a corporate deal worth 130 billion yen by Xerox Credit Corp -- the largest yet.
In the asset management business, U.S.-based State Street Bank said it would increase its staff to 500 from 300 in the next one to two years. It has US$6.2 trillion assets in custody for major global investors and US$720 billion under management.
Britain's Standard Chartered Bank is expanding its foreign exchange and bond operations in Japan, and one area it is targeting is derivatives, a senior bank official said.
It has established a new Tokyo dealing room for foreign currency and bond trading and plans to expand its markets staff to 20 from seven in the next two to three years, a senior bank official in charge of market operations said.
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