Overview of Banks in Japan
The banks in Japan operate similarly to institutions around the world offering regular financial services. With the advent of technology, Japan is progressed rapidly at the forefront of online banking services. The Bank of Japan (Central Bank) was established in 1882 for controlling the domestic supply of money and acting as a “Lender of Last Resort” for the Japanese banks.
Currently, the financial system in Japan is going through a negative interest rateNegative Interest RateWhen the interest rate falls below 0 percent, we have a negative interest scenario. This implies that banks will charge you interest for keeping your money with them. It is more common during periods of extreme deflation. regime whereby depositors have to pay for saving their money and lenders are paid for borrowing money.
Structure of Banks in Japan
The banking system of Japan is bifurcated into:
- Foreign Banks
- Domestically licensed banks which include Regional Banks, City Banks, and Trust BanksTrust BanksTrust Bank is a financial institution that enables the customers of the bank to do transactions among one another, wherein the bank takes up the role of trustee during such transactions and help customers to transfer assets to another customer in accordance with the trust agreement terms and conditions.
The traditional banks in Japan was divided into clearly defined segments:
- Commercial BanksCommercial BanksA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.
- Long-term credit banks
- Trust Banks (Retail BankingRetail BankingRetail banking or personal banking refers to the financial services offered by the financial institutions exclusively to the individual clients. The consumer banking provides personal loan, savings account, debit cards, credit cards, locker, etc. activities)
- Loans & Savings Bank
It was during the 1980s that non-banking operations (Consumer LoansConsumer LoansA consumer loan is a type of credit given to a consumer to finance specified set of expenditures. The borrower must pledge a specific asset as collateral for the loan, or it may be unsecured depending on the loan's monetary value., Credit Card) had also cropped up and then such organizations also started offering traditional functions of banks (e.g. issuing of loans). Subsequently, in 1990, the 5 largest banks in the world were Japanese banks in terms of total assets. Such banks opened branches across the globe, traded in FOREX activities and flourished the position of the Japanese banking system on the World Map.
List of Top 10 Banks in Japan
- Mitsubishi UFJ Financial Group
- Japan Post Bank
- Mizuho Financial Group
- Sumitomo Mitsui Financial Group
- Norinchukin Bank
- Resona Holdings
- Fukuoka Financial Group
- Chiba Bank
- Bank of Yokohama/Concordia Financial Group
- Hokuhoku Financial Group
Let us explain each one of them in detail –
#1. Mitsubishi UFJ Financial Group
One of the main companies of the Mitsubishi Group, this bank is Japan’s largest financial group and the world’s second-largest Bank Holding company. It is the second-largest firm in Japan in terms of market capitalization with its headquarters in Chiyoda, Tokyo. It functions a variety of its businesses such as Retail Banking business, Corporate Banking, and Trust assets with its presence in around 50 countries. The Net Operating Profits for 1Q17 was ¥349.0 yen.
#2. Japan Post Bank
Established in 2006 and headquartered in Tokyo, is primarily a savings institution. This was a part of the reorganization of Japan Post into Japan post holding which permits the wiring of funds between the Post office and Banking unit. The loan facilities include the overdraftOverdraftOverdraft is a banking facility that offers short-term credit to the account holders by allowing them to withdraw money from their savings or current account even if their account balance is or below zero. Its authorized limit differs from customer to customer. services secured by Japanese Government bonds and Time-bound Deposits. It is one the largest deposit banks of Japan and also offers nationwide services of funds withdrawal with International Debit and Credit cards.
The total assets of the banks were $714.4 billion with a total income of $3billion as of 2016.S
#3. Mizuho Financial Group
This is a public sector bank holding company with its headquarters in the Otemachi district of Chiyoda in Tokyo. Established in 2003, this group offers various banking services around the globe such as:
- Business and Retail Banking
- Corporate and Institutional Company
- Global Corporate Banking
- Asset management services
- Markets and Securities
- Norinchukin Bank
- Resona Holdings
The bank employs around 60,000 employees and had a Net Income of JPY 118.2bn for Q1’17.
#4. Sumitomo Mitsui Financial Group
This is a Japanese Bank Holding/ Financial services company established in 2002 located in Chiyoda, Tokyo. It holds assets worth $1.8 trillion around the world offering services such as:
- Personal Banking
- Corporate Banking
- Investment Banking/Management
- Wealth Management
- Credit Cards
For the year 2016, it reported total assetsReported Total AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equity of $1,656 billion and a total income of $8,749 million. It has a number of subsidiaries offering professional services for respective financial products.
#5. Norinchukin Bank
It was founded in 1923 by the Japanese government for supporting the agricultural prospects of the country. It played a crucial role in rebuilding post World War II especially with investments in the textile industry. It is one of the largest institutional investors with an investment portfolio of greater than $400 billion and assets in excess of $850 billion and well known as Japan’s largest hedge fund with branches located in New York, London, and Singapore.
The bank invests in bonds, securitization facilities, stock private equity, real estate, forest, and fisheries. As of 2016, the total assets of the bank were $1,000 billion and a total income of $19 million.
#6. Resona Holdings
It is the holding companyHolding CompanyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary's directions and policies. of the Resona group (5th largest banking group) with its headquarters in Koto, Tokyo. The primary operating entities of the group are:
- Resona Bank (Corporate & Retail bank)
- Saitama Resona Bank
The focus of the groups is to offer professional services in the following segments:
- Individual Segment – Consultation relating to Personal Loans, Asset Management/Restructuring
- Corporate Segment – Loans for Corporate, Asset managementAsset ManagementAsset management is a method of managing funds and investing in both traditional and specialized products in order to generate returns consistent with the investor's risk tolerance. , Real estate, Corporate Pension, Business succession and other supporting activities for the growth of a business.
- Market Segment – Responsible for Procurement and operation of funds, FOREX, bonds, and derivative facilities
For Q1’17, the Net Income attributable to shareholders is 37.2 billion yen and employing around 70,000 employees.
#7. Fukuoka Financial Group
This is a Japanese company listed on the Nikkei and established as a financial holding with the holding of the Shinwa Bank as a wholly-owned subsidiaryWholly-owned SubsidiaryWhen a company’s almost all of the outstanding shares are owned by another company (parent) then it can be said that it is a wholly-owned subsidiary of that company and it is controlled by the parent company. For example, Walt Disney Entertainment owns 100% of Marvel Entertainment which produces movies.. With its headquarters in Fukouka (the largest city of Kyushu located in the south of Japan). The primary services of the group are in Banking which constitutes Deposits, Loans, Domestic and foreign exchange services.
Other services include Guarantees, Revitalisation support businesses, Management of loans and Collection business. For 2016, the total income of the bank was $2 billion.
#8. Chiba Bank
This bank is the 3rd largest of Japan’s 64 regional banking groups with respect to total assets. It has headquarters in Chiba (adjacent to Tokyo) and has one of the most important industrial concentrations across Japan.
The strategy of the bank is to expand its branch network into adjacent areas along Tokyo-bound railway lines. Emphasis is also on the development of southern Chiba Prefecture as a tourist and resort area. It is one of the few institutions disclosing NIM (Net Interest MarginsNet Interest MarginsNet Interest Margin is a popular profitability ratio used by banks which helps them determine the success of firms in investing in comparison to the expenses on the same investments. It is calculated as Investment income minus interest expenses (this step is referred to as netting) divided by the average earning assets.) on their lending facilities.
#9. Bank of Yokohama/Concordia Financial Group
This is the largest regional bank of Japan operating in Southwestern Tokyo. It was formed amidst a collapse of several existing banks in the region to smoothen the financial services in the region. In 2015, the Bank of Yokohoma announced a merger with Higashi-Nippon Bank for the creation of Concordia Financial group. This was subsequently listed at the Nikkei 225 stock market index.
#10. Hokuhoku Financial Group
It was established in 2003 with its headquarters in Toyama. The following segments are operated in this group:
- Hokuriku Bank
- Hokkaido Bank
- Others segment
The banking segments offer financial services through banking operations. The Others segment handles the leasing and credit card business and Non-Banking subsidiaries.
The Hokuriku Bank and the Hokkaido Bank underwent management integration in 2004 to form the Hokuhoku Financial Group Inc. which today operates as a super-regional financial network enclosing entire Hokuriko region (Tokyo, Osaka and Nagoya areas)
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