Saiko Nakagawa, Director for Asset Management Business, Financial Services Agency, Japan (JFSA)

「Sustainable economic growth and stable asset formation through the creation of an International Financial Center」

 

– FinGATE Tenant Interview Vol.06 –

 

Kabuto-cho and Kayaba-cho have been attracting attention both as a new hub for culture and trends as well as a hub for asset managers and fintech start-ups lately with the redevelopment of the area.   FinGATE is the incubator which supports the start-up and development of independent asset management companies and fintech-oriented financial services ventures.  There are 4 facilities that operate under the FinGATE brand name, namely FinGATE BASE, FinGATE KABUTO, FinGATE KAYABA and FinGATE TERRACE which collectively are home to more than 50 finance related startups, government and promotional organizations for finance.

This series welcomes different FinGATE tenants to hear about the present and the future of their organization and their thoughts about the local area.

We are delighted to host Saiko Nakagawa, Director for Asset Management Business of the Financial Services Agency for the 6th edition of this series to hear about the purpose and role of the Financial Market Entry Office which was set up at FinGATE TERRACE in June 2021 and about FSA’s endeavours for creating an International Financial Center.

Please visit FSA’s dedicated website on the International Financial Center Initiatives and official LinkedIn account page.

 

I understand that FSA has been working on policies to create an open International Financial Center as a cross-government all-Japan effort.  What is Japan’s advantage vis-a-vis leading Asian centers such as Hong Kong and Singapore?

Saiko Nakagawa　Hong Kong and Singapore are both highly prominent Asian International Financial Centers and it does not seem realistic to encourage  firms to close their entire offices there immediately and relocate to Japan.  Each city has advantages and disadvantages for running a global business.  The important point is that international financial centers complement each other to enhance the resiliency of the financial system both for Asia or globally.  If there are strengths that Japan has over Hong Kong or Singapore, Japan should play on them and vice versa.

I believe that Japan has the following strengths: It is the world’s 3rd largest economy; its household financial assets reaches JPY2,000 trillion; it is a safe country; and, as the only Asian member of G7 nations, we share universal values such as democracy and freedom.

Let me also add that amidst the ongoing pandemic and changes in the global socio-economic landscape, the importance of resilience is being recognised in ensuring stability of our economy and society.  Just like investment, many people would have understood the importance of diversification, here I mean of office locations, from the perspective of risk management which may have felt inefficient in a business as usual situation.  Firms who have set up one single office in Asia to service neighbouring Asian markets have not been able to make necessary business travels under Covid.  I believe that the case for having an office in Japan has risen from the resiliency perspective.

 

There has been the slogan “from savings to investment” but we receive the impression that we are only half way through.  What are your plans going forward?

Saiko Nakagawa　I think that interest in asset building has been growing with the enhancement of schemes such as the new type of NISA (Nippon (Japan) Individual Savings Account, tax-exempt investment account), and iDeCo (individual-type Defined Contribution pension plan).

In finance there are different types of businesses such as banking, securities and insurance but the International Financial Center Initiatives focus on the asset management business.  It is because of the important role the asset management business plays in helping people manage their assets stably and its ability to help solve societal challenges through the power of finance as we see with the growth of ESG investment nowadays.  It would be a delight if we see the younger generation, who are seen as interested in societal issues, become interested in investing as they become more aware of how their money is being used.

 

 

What is the purpose for FSA’s establishment of the “Financial Market Entry Office” in Kabuto-cho?

Saiko Nakagawa　The Office was initially set up in Kasumigaseki in January 2021 and then it was relocated to Kabuto-cho in June 2021.

We have been able to revise some of the laws and regulations in coordination with other government organizations to resolve issues such as tax and immigration which have been seen as hurdles to foreign asset management firms wishing to enter Japan.

In addition, the need to use Japanese in administrative processes for obtaining necessary licenses was regarded as a major hurdle.  In order to resolve this issue, the “Financial Market Entry Office” in Kabuto-cho is able to provide one-stop all-in-English services from pre-consultation for foreign asset management firms on license registration to the registration process itself and supervision after completing the registration.  We chose Kabuto-cho as a location because it has been known historically as an area for market participants with the Tokyo Stock Exchange and related industry associations being located in this neighbourhood.

 

Can you please share with us the progress the Financial Market Entry Office has been able to make since its inception?

Saiko Nakagawa　Four foreign asset management firms have been able to complete their registration in English by the end of November 2021.^(*)  They are all highly regarded firms overseas.  Due to the Covid contagion, we are now unable to go abroad and promote Japan to overseas firms but we are joining various online events in order to connect with overseas asset management firms.  I hope to be able to travel abroad and present on our International Financial Center initiative in the future.

^(*) Five firms were registered as of January 2022.

 

What attracts foreign firms to Japan?

Saiko Nakagawa　Ultimately it is Japan’s potential as a market to source and to invest capital.  As I mentioned earlier, I believe that the fact that half of Japan’s colossal household financial assets amounting to JPY2,000 trillion is kept as cash or deposit makes Japan attractive to asset managers.

Furthermore, they are attracted by Japan as a market to invest in.  Not only are there large global companies but also there are many attractive startups and small and midsize businesses.

However, it is hard to cover information on such companies from abroad and opening an office in Japan to carry out research will increase the visibility of such companies.

In other words, for foreign asset management firms, as well as being a place to source capital, Japan is also a place to invest and earn a return.  I believe firms who have discovered this are deciding to enter the Japanese market.

 

There are many asset management firms in Japan.  In order to stimulate competition for asset management business, do you have any plans to develop Japanese asset management firms?

Saiko Nakagawa　The Financial Market Entry Office was set up to support smooth entry by foreign asset management firms but FSA has also been in continuous dialogue with incumbent asset managers to discuss the prioritization of the interest of clients in product origination, fund administration and governance to strengthen their asset management capabilities.  From the viewpoint of upgrading and invigorating Japan’s asset management business, both the entry by foreign players and the development of local firms would be important.

 

How would you like the Financial Market Entry Office to develop in the future?

Saiko Nakagawa　Because the Financial Market Entry Office was set up to support foreign asset management firms to enter Japan, there is much attention to the fact that the Office can provide support in English.

This alone is a significant step for the Japanese government, but it is nothing special as authorities support firms in English in Hong Kong and Singapore.  Therefore, I hope that support in English becomes a natural thing for the Office and we should be aiming to be recognized as an Office which can provide a clear explanation of the system, support towards company establishment and everyday life to our users beyond providing support to licensing.

I do not know whether it will be 5 years ahead or 10 years ahead, but I hope that such efforts will result in the entry of many foreign asset managers, improve the competitiveness of local asset managers, and contribute to the ultimate goal of financial administration: the sustainable growth of companies and the economy and the increase in the welfare of the people through stable asset building. If we can do this, we will have achieved a certain level of success in our vision of an international financial center.

 

Please tell us about your expectations for FinGATE and Kabutocho.

Saiko Nakagawa　It has been difficult to conduct face to face meetings under the restrictions to prevent the spread of Covid in 2021 but from autumn with the decrease in infection cases, we are seeing the return of face to face activities.  As Kabutocho has steadily been growing as a new hub for finance related startups, we have been able to enjoy chatting with neighbours at the lounge spaces in FinGATE and receiving visitors who drop by to see our Office.  This kind of communication is vital and we look forward to many such opportunities in the future.

 

Thank you for your cooperation.

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