Japan regulatory head scolds weak regional banks: ‘Don’t blame BOJ’

Japan’s roughly 100 regional banks are grappling with diminishing returns from their traditional lending business. (AFP)
Updated 22 August 2018
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Japan regulatory head scolds weak regional banks: ‘Don’t blame BOJ’

  • A shrinking population outside Japan’s biggest cities is hurting business
  • Regional banks’ combined core profits totaled ¥1.2 trillion ($10.9 billion) in the year ended in March, data compiled by FSA shows

TOKYO: Japan’s top financial regulator said regional banks “should not blame the Bank of Japan” for their woes, urging them to explore ways to survive ultra-low interest rates.
“They should not just sit and wait for the BOJ to change its policy. Will everything be alright if it seeks exit and normalizes interest rates? I don’t think so,” Toshihide Endo, commissioner of the Financial Services Agency (FSA), told Reuters in an interview on Wednesday.
The comments come as many of Japan’s roughly 100 regional banks grapple with diminishing returns from their traditional lending business, hit by a low interest rate environment amid the BOJ’s ultra-loose monetary policy.
A shrinking population outside Japan’s biggest cities is also hurting business.
Regional banks’ combined core profits totaled ¥1.2 trillion ($10.9 billion) in the year ended in March, data compiled by FSA shows, down 30 percent from five years earlier, just before the central bank launched aggressive monetary easing.
Endo, who became FSA chief in July, said managements at some regional banks needed to get their act together, warning that they were “not considering seriously” how to build a sustainable business model despite the industry’s gloomy prospects.
“We have been telling them to consider action and make judgments on their own, not just because we tell them to do so,” he said.
Endo said FSA is not urging consolidation among regional banks, emphasizing it is up to the management of each lender to decide on options to survive.
At the same time, Endo said there have been some mergers that made him doubt managements’ seriousness. “Some rival banks got together under a holding company just for the sake of a non-aggression pact. I don’t see the point of it,” he said.
Endo, 59, joined the finance ministry in 1982. From 2015 until last month, he oversaw the country’s financial firms at the FSA’s supervisory bureau. Before that, he ran its inspection bureau.
On cryptocurrency exchanges, he said the FSA was trying to strike a balance between protecting consumers and promoting technological innovation.
Japan last year became the first country to regulate cryptocurrency exchanges, as it tries to encourage technological innovation while ensuring consumer protection.
The FSA took a tougher stance toward the industry after the $530 million theft of digital money from Tokyo-based Coincheck Inc. in January.
FSA inspections found sloppy management at many of the exchanges, saying they lacked basic internal controls to protect users and prevent money laundering. As a result, some exchanges were ordered to temporarily suspend operations.
“We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.”


Smartphone business indispensable to brand portfolio: Sony CEO

Updated 25 min 59 sec ago
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Smartphone business indispensable to brand portfolio: Sony CEO

  • Sony’s smartphone business reported an operating loss of ¥97.1 billion ($879.45 million) in the year ended March
  • Sony is beefing up gaming functions of its smartphones to tap customers of its successful PlayStation gaming business

TOKYO: Sony sees the smartphone business as indispensable to its brand portfolio, its CEO said, bucking calls from some investors that the Japanese electronics firm should scrap the money-losing business.
The smartphone business reported an operating loss of ¥97.1 billion ($879.45 million) in the year ended March, lagging rivals such as Apple and Samsung Electronics and weighing on the group’s record-breaking profit.
Sony’s consumer electronics hardware business “has centered on entertainment since our foundation, not daily necessities like refrigerators and washing machines,” Kenichiro Yoshida told a group of journalists on Wednesday.
“We see smartphones as hardware for entertainment and a component necessary to make our hardware brand sustainable,” he said. “And younger generations no longer watch TV. Their first touch point is smartphone.”
The business, originally a joint venture with Sweden’s Ericsson that Sony took full control of in 2012, has a global market share of less than 1 percent, shipping just 6.5 million handsets annually, mainly to Japan and Europe, according to Sony’s financial statement.
As Sony aims to make the business profitable next financial year, it ceased production at its Beijing plant and streamlined some sales operations globally.
Sony is beefing up gaming functions of its smartphones to tap customers of its successful PlayStation gaming business.
Yoshida also said he is confident in improving profitability at the pictures business.
Separately, Reuters reported Daniel Loeb’s hedge fund Third Point is again building a stake in the company, as part of its second campaign for change at Sony in six years.
Third Point wants Sony to explore options for some of its business units, including its movie studio, which the fund believes has attracted takeover interest, people familiar with the matter previously said.
“It was good that in the past Third Point came in and we had various discussions on the pictures business,” Yoshida said. Sony has sharply improved disclosures of the pictures business since then, he said.
The management team of the pictures unit has been “reshuffled almost entirely over the last three or four years,” Yoshida said.