A Study of Strategic Themes in the Internationalisation of Japanese Industry
New Horizons in International Business series
Chapter 21: Expansion and Withdrawal of Financial Services
21. Expansion and withdrawal of ﬁnancial services OVERVIEW The ﬁnance and insurance sector in Japan refers to banking and related ﬁnancial businesses, the securities industry and the insurance industry. Japanese banks and other ﬁnancial institutions have traditionally established subsidiaries overseas to meet the international business requirements of their domestic clients, such as trade ﬁnance and the provision of credit and other ﬁnancial services to the overseas subsidiaries of Japanese ﬁrms. In general, direct investment by the ﬁnancial sector refers to transactions related to equity capital and permanent debt (loan capital representing a permanent interest) used to found overseas operations including branches, local subsidiaries and representative oﬃces. Deposits and loans of banks and other ﬁnancial institutions are classiﬁed as portfolio investment – although loans from banks in Japan to their subsidiaries abroad would be classiﬁed as FDI even if these funds were on-lent. The choice of entry mode and location is also inﬂuenced by host country regulations on foreign investment in the ﬁnancial sector (Duce, 2003). Traditionally, Japanese banks have played an important role in the ﬁnancing of FDI by ﬁrms in other industries, as well as through the banking industry’s own expansion into international ﬁnancial markets. In contrast, securities companies and insurance companies have been more active in the management of Japanese portfolio investment, for example in the acquisition of long-term debt securities such as US treasury bonds. Over the post-war period, Japanese banks were a key source of investment credit both domestically and in the ﬁnancing...
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