Shifts in the Japanese Economy and the Potential Impact on EU Japan Investment: Insights from the...

Shifts in the Japanese Economy and the Potential Impact on EU Japan Investment:

Insights from the Financial Sector

Vice-Chairman, International Bankers Association of Japan, Chief Country Officer, BNP Paribas Japan Group,

& CEO and Representative Director, BNP Paribas Securities (Japan) Limited

Philippe Avril

Fifth EU Asia Top Economist Round Table EU Japan Economic Forum

Tokyo, 14 November 2014

2

1. Japanese Financial Markets: Size Matters

2. Business Environment: Financial Regulations

3. Increase in cross-border flows

Contents

3

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

USA China Japan GermanyFrance UK Brazil Russia Italy India

USD bln

Source: IMF World Economic Outlook database

GDP : Top 10 countries in 2013

Japanese Financial Markets: Size Matters

4


Household sector- Financial assets

Source: BOJ, BNP Paribas

JPY trillion

As of March end of each year

5

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

NYSE NASDAQ JapanExchange

Group

Euronext HKExchange

Shanghai SE TMX Group DeutscheBörse

SIX Swiss ShenzhenSE

USD bln

Source: World Federation of Exchanges

Stock Exchange: Market Capitalisation (as of June 2014)


6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

NYSE NASDAQ JPX Shenzhen SE Shanghai SE Euronext Deutsche Börse HK Exchange TMX Group Korea Exchange

USD mln

Source: World Federation of Exchanges

Stock Exchange Turnover: Value of Share Trading (YTD June 2014)


7

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

USA Japan Italy UK France Germany

USD bln

Outstanding balance of government bonds (as of October 2014)

Source: Bloomberg


0

200

400

600

800

1,000

1,200

1,400

GPIF GPF Norway ABPNetherland

NationalPension

South Korea

FRT US CPE US Canada P NSS China CPFSingapore

PFZWNetherland

8


USD blnTop 10 Pension Funds in the world

Source: Pensions & Investments / Towers Watson 300 analysis

9


Monetary base

146 trn(Mar. 2013)

202 trn(end 2013)

275 trn(end 2014)

0

50

100

150

200

250

300

350

400

09 10 11 12 13 14 15

Projection

Source: BOJ, BNP Paribas

JPY trillion

10

Business Environment: Financial Regulations

Considerably improved over the last few years: “Better Regulation” initiative

Perceived strong commitment from Japan to global agreements and international coordination

Broad thinking alignment between European and Japanese financial regulators / European and Japanese financial institutions

Constructive dialogue between foreign financial institutions and Japanese financial regulators on continuous improvement of regulatory environment

11

Increase in cross-border flows

EU36%

North America33%

Central and South

America19%

Oceania4%

Others8%

Investment in Foreign Bonds

Source: BOJ

2013(JPY trillion)

Total: JPY 284 trillion

12


0

5

10

15

20

25

30

35

40

45

197

1/3

197

3/3

197

5/3

197

7/3

197

9/3

198

1/3

198

3/3

198

5/3

198

7/3

198

9/3

199

1/3

199

3/3

199

5/3

199

7/3

199

9/3

200

1/3

200

3/3

200

5/3

200

7/3

200

9/3

201

1/3

201

3/3

201

5/3

Foreign investors Retail (individual + trust funds)

%%

Ownership ratio (Foreign investors and Retail) of listed stocks

Source: Tokyo Stock Exchange

13


Source: MARR

Target for Outbound M&A transactions

Number of Outbound M&A transactions

2011 2012 2013

455 transactions 515 transactions 499 transactions

96

123

83

60

5529

9

112

18478

56

55 246

116

14799

73

301915

14

Rank Announced date Target name Acquirer nameDeal value

(US$m)

1 24 Sep, 2013 Tokyo Electron Ltd Applied Materials Inc 6,986

2 2 Jul, 2013 Bank of Ayudhya PCL Bank of Tokyo-Mitsubishi UFJ 5,315

3 26 Sep, 2013 Grohe AG

LIXIL Group Corp /

Development Bank of Japan Inc.

* BNPP acted as FA to LIXIL

3,959

4 11 Jun, 2013 Hitachi-Thermal Power Business Mitsubishi Heavy Industries-Thermal Power Business 3,277

5 19 Feb, 2013 Robeco Groep NV ORIX Corp 2,593

6 9 Sep, 2013Lucozade and Ribena business

(GlaxoSmithKline PLC) Suntory Beverage & Food Ltd 2,119

7 27 Sep, 2013 Panasonic Healthcare Co. Ltd. Kohlberg Kravis Roberts & Co. L.P. 1,677

8 29 Nov, 2013 Thyssenkrupp Steel USA LLC Nippon Steel & Sumitomo Metal Corp / Arcelor Mittal 1,550

9 15 Oct, 2013 Supercell OySoftbank Corp. Japan / GungHo Online Entertainment

Inc.1,530

10 26 Apr, 2013 Sumikin Bussan Corp Nippon Steel Trading Co Ltd 1,388

N.B. Japan related announced transactions, Outbound transactions in green Source: Thomson Financial, BloombergStock buy-backs, Inter-group reorganization not included


15


Further potential

Impact of Japanese monetary policy: growth of foreign investment• Financial institutions: asset diversification (e.g. GPIF)• Individual savings: escape from negative real interest rates• Direct investment by Japanese corporations: strategic imperative of

foreign development

Impact of public finances• New financing methods required for public/private projects

(e.g. infrastructure)

Impact of growth strategy?

Shifts in the Japanese Economy and the Potential Impact on EU Japan Investment: Insights from the...

Economy & Finance

Transcript of Shifts in the Japanese Economy and the Potential Impact on EU Japan Investment: Insights from the...