The Japanese Liberal Democratic Party, the nation’s ruling-party, is reportedly planning to make it easier for local banking institutions to branch out into different sectors, which could help them compete with or even push back against emerging Fintech firms and other tech startups.
The party’s financial policy research group says it wants to propose changes to Japan’s banking law. The research panel recommends easing limits on Japanese lenders’ lines of business and they also suggest relaxing limits on non-financial companies.
As first reported by Bloomberg, the new banking law proposal was introduced last week, however, the current version doesn’t mention which specific sectors traditional banks should be allowed to enter.
The Japanese government has been working on various initiatives in order to further improve the $5 trillion economy’s financial services industry. The country’s government might allow Big Tech firms and other external businesses to play a bigger role in the local Fintech industry.
Japanese lawmakers have recommended providing more assistance to lenders, who may be struggling due to several years of historically low interest rates. They are also tasked with even more responsibilities at this critical time, as they need to support Japanese businesses and households impacted by the deadly COVID-19 outbreak.
Seiji Kihara, deputy chairman at the LDP’s research council, who is leading the new banking law proposal, told Bloomberg:
“We are no longer in an era where we need to straitjacket banks with regulation. You can’t support regional economies only through Fintech.”
Japanese Prime Minister Shinzo Abe’s administration has removed some of the limitations and restrictions placed on money transfers facilitated by tech firms. It now appears that an increasing number of local technology companies could begin offering financial services, which seems like a growing trend in other Asian countries with large economies such as Indonesia.
Open Banking in Japan (along with other jurisdictions) has also taken off, with bank clients’ information now easily available to other service providers, after obtaining the users’ consent.
Japanese banks say that deregulation or easing restrIctions should be done in a balanced manner.
Kanetsugu Mike, Chairman of the Japanese Bankers Association, recently noted:
“While keeping with the spirit of regulation, it’s important to secure an equal footing among players.”
Banks in Japan could generate more revenue if they enter the advertising industry. For instance, lenders may be able to charge advertising firms that want to work with online banking clients. Banks could provide customers’ transaction information to advertisers (after obtaining consent).
Banks based in Singapore have expanded into the digital commerce sector after regulators removed certain restrictions.
According to a recent report, Japan’s largest banks will be looking into the potential benefits of using electronic money and digital currencies in order to make banks and cashless payments systems interoperable.
The initiative has been launched by Japan’s Mitsubishi UFJ Financial Group, the world’s fifth-largest bank in terms of total assets (appr. $2.5 trillion); Mizuho, the third-largest financial services company in Japan with around $1.8 trillion in assets; and Sumitomo Mitsui Corporation Group, a multinational banking, and financial services institution based in Tokyo.