Wealthy Japanese Attract U.S. Money Managers

For some time now, financial services companies, especially American ones, have been warded off by Japan's lackluster economy, in particular its prolonged battle with deflation.

But that seems to be changing. Now, everyone wants a piece of the Japanese private banking pie. Asset management is finally being seen as a growth industry in Japan, now embracing financial sector deregulation. Near-zero interest rates are also prompting more and more Japanese to ditch the customary bank savings accounts for higher income-generating investments.

A Reuters article reports that several companies, both Japanese and American, are scrambling to market their asset management services to potential clientele. At the top end of the scale there are about 1.3 million Japanese who each have at least 100 million yen ($935,700) available to invest, according to research by Merrill Lynch.

"If even just a few of those people shift it's attractive for the banks," said Graeme Knowd, director of credit research at UBS in Tokyo.

In light of the recent shutdown of Citigroup's private banking unit in Japan amid compliance problems, the roster of companies that want to take their business to wealthy clients in the Land of the Rising Sun is growing. Mizuho Financial Group, Japan's top lender, plans to launch a new private banking unit, possibly through a capital tie-up with a foreign financial company.

Nikko Cordial Corp., the country's No.3 brokerage firm, has said it will team up with Europe's Banque Privee Edmond de Rothschild to market trust services to wealthy clients.

Mitsubishi Tokyo Financial Group Inc., Japan's No.2 banking group, is in talks with Merrill Lynch on a securities joint venture in Japan, which financial sources told Reuters could be set up in the business year to March 2006.