By Makiko Yamazaki and Ritsuko Shimizu
TOKYO (Reuters) -The Japanese government's reform push for the country's $5 trillion asset management industry has sparked a series of action plans from top Japanese banking groups to beef up their long overlooked asset management business.
Asset management has emerged as an area of focus for the banks this year as the financial regulator sought their help to shake up the industry in line with Japan's policy pledge to turn dormant household savings into investments.
The business could potentially become a major profit centre for the banks if an end to decades-long deflation drives households to shift their money out of bank deposits into stocks, bonds and other assets to hedge against inflation.
"We aim to build up the asset management business as the group's fourth pillar after banking, trust banking and brokerages," Mitsubishi UFJ (NYSE:MUFG) Financial Group's chief executive Hironori Kamezawa told Reuters in an interview.
Japan's top banking group now aims to double the amount of assets under management to 200 trillion yen ($1.4 trillion) by March 2030, he said. "We will utilise resources across the group to do this."
Specific steps include hiring asset managers and making more use of the group's other businesses such as project finance loans to diversify products, Kamezawa said.
LAST CHANCE
After years of failing to bring about a change in investment habits of households, the Japanese government is reviving its effort again, warning that cash that households are holding onto would be worthless in an inflationary environment.
The asset management industry is central to achieving this policy, but the government worries that the industry, dominated by those affiliated with large financial groups, may have been under resourced.
Showing commitments to the government's reform drive, No. 2 Japanese lender Sumitomo Mitsui (NYSE:SMFG) Financial Group revealed a plan in September to shift some bankers from the proprietary trading business to the asset management business to help enhance a product line-up.
Sumitomo Mitsui Trust Bank, one of Japan's top trust banks, plans to invest 500 billion yen ($3.48 billion) to expand its asset management business by 2030, including acquisitions of boutique asset management firms, Kazuya Oyama, the head of the bank told Reuters in an interview.
The bank particularly aims to grow in private asset markets, including private equity, private credit and infrastructure, to allow a broader range of clients to access such illiquid assets in Japan, he said.
Similarly, Mitsubishi UFJ, which recently bought London-based private credit firm AlbaCore Capital, is looking out for more M&A opportunities in private asset markets, CEO Kamezawa said.
Investing in private assets, which can lead to higher returns, "has not been rooted in Japan yet," Sumitomo Mitsui Trust's Oyama said. "We want to democratise this asset class so that ultimately individual investors can access such assets and receive returns."
"There were no issues with keeping money in bank deposits during the decades of deflation," Oyama said. With emerging signs of sticky inflation, however, people would have a sense of urgency that they have to do investment, he added. "I think this is our last chance (for reviving the industry)."
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