International Expansion Strategies of Japanese Financial Institutions

November 24, 2008

Abstract

Tokyo, Japan November 25, 2008

International Expansion Strategies of Japanese Financial Institutions

Japanese financial institutions are pursuing aggressive expansion strategies abroad, due to increasing environmental and competitive pressures.  However, Japanese firms face a number of challenges in succeeding overseas.

Japanese institutions have reemerged onto the world stage as one of the few success stories in the subprime mortgage meltdown.  After a painful period of cost cutting and consolidation, firms are looking to regain their strength in the international arena.  A new report, International Expansion Strategies of Japanese Financial Institutions, analyzes new opportunities and risks as part of a broader look at the industry’s renewed focus on overseas operations.

Depressed economic growth in combination with a shrinking population, increased foreign competition, and an oversaturated financial services industry has forced Japanese institutions to seek new sources of revenue outside of their home market. Despite a commitment to overseas expansion, however, the international operations of Japanese institutions mostly generate lower margins than operations in the domestic market.

While Japanese firms suffered subprime-related losses, they have not been as severely affected as their Western counterparts.  In their relatively healthy state, firms can take advantage of lowered valuations of US and European companies to make inexpensive acquisitions and equity investments. While acquiring some of these distressed firms will likely be a good investment in the long-term, Japanese companies concerned about short-term returns should be cautious, considering the extreme volatility in the market.

"International expansion may be the key to success in the future, but Japanese firms need to start improving the profitability of their overseas ventures now," says Lucy Cheng, Celent analyst and author of the report. "Their foreign operations must be able to stand on their own financially, especially as domestic business weakens." This report looks at the 15 largest companies from the Japanese banking, securities, and insurance sectors and analyzes the strategies they have used to expand into foreign markets. 

The report also analyzes specific location criteria and entry strategies for Japanese financial firms entering or expanding into international financial services markets. The report assesses opportunities and risks in the Americas, Asia, and Europe, in addition to detailing potential opportunities in China, India, US, Brazil, UK, and Germany. 

The report is 70 pages long and contains 47 figures and 8 tables. A table of contents is available online.

of Celent's research services can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Tokyo, Japan November 25, 2008

International Expansion Strategies of Japanese Financial Institutions

 

Executive Summary 3
Introduction 5
Background 6
Approaches to International Expansion 12
Location Choice 13
  Asia 15
  Americas 22
  Europe 29
Method of Entry 31
  Pure Capital Investment 32
  Contractual Alliances 32
  Joint Ventures 32
  Wholly Owned Operations 33
  Organic Growth Vs. Mergers and Acquisitions 34
Current International Strategies of Japanese Financial Institutions 36
  Megabanks 38
  Securities Firms 47
  Life Insurance 52
  Property and Casualty Insurance 55
Japanese Financial Institutions: Challenges to Overseas Success 62
Conclusions 67

 

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