Initially, the international reserve of Yen decreases from 6.78 in 1995 to 3.01 in 2009, which is lower than GBP, and far lower than USD and EUR. Considering the other functions of international currency, i.e. as currency of price quotations or in settlements in trade. JPY is much lackluster than USD, EUR and even GBP. In fact, at 1984, The U.S. wanted to force Japan to open capital programme and domestic market. In another words, Yen's Internationalisation came from the "pressure" and "profit attraction". At the same time, local Japanese and also foreigners are too optimistic for Yen. Moreover, Quickly opening up of capital account before literally domestic financial reform results in a "re-lending game" between the onshore and offshore market that is the critical cause for 1990 bubble crisis and decades of economic slump. After the bubble economics crisis in 1990, many Japanese scholars have already realized that Yen is more like a "transit currency" that normally used to carry trade in international financial market after Yen's internationalization. In addition to political, military causes and underdeveloped domestic financial market, the fundamental factor for the difficulty of use of Yen in trade settlement is the noncompetitive non-financial business and lack of influencing multinational corporations.
Current Situation of Japanese Banks' Internationlisation
In this project, the first and second biggest financial service firms, Nomura Holding Inc. (hereafter Nomura) and Daiwa SMBC capital Co. Ltd. (hereafter SMBC), are taken as representatives and examples of Japan investment banks.
Nomura is dominating in domestic Japan and has branches in Western Europe, Middle and Eastern Europe, Middle East and North Africa, Pan-Asia, and North America, but not South America, including some emerging countries like Brazil and Argentina. After a long time development, Nomura has become a comprehensive company, including three main aspects - retail, wholesale, and asset management. Its wholesale department has three sub-sections: Fixed Income, Equities and Investment Bank. At the same time, its Equities have the number one market share in Tokyo Stock Exchange, and are also dominating in customer share in London Stock Exchange. SMBC is the first runner-up financial service provider in domestic Japan market also with complete and comprehensive services.
The big banks are taking some tentative steps towards globalizing operations. I.e. firstly, SMBC has been chosen as sole financial adviser to the Saudi Arabian government in its privatization of Medina Airport. Secondly, Norway's Petroleum GeoServices is buying two new ships with $250m in loans from Japan Bank for International Co-operation and SMBC, reflecting the retreat of European banks from shipping finance. Thirdly, in Japan, SMBC this year appointed Rajeev Kannan as general manager of the project and export finance department - the first non-Japanese to be appointed a general manager in Japan and the most senior position help by a non-Japanese at the bank in Japan. Fourthly, Nomura acquired a big part of Lehman Brothers, the former one of top three investment banks in United States with a long history.
Problems with Japanese Banks' Internationlisation
Yet Japan's banks in many ways appear robust, having avoided much of the investment in tarnished securities that felled raised substantial capital and strengthened their balance sheets, which they can now deploy to increase their businesses overseas. What questions and problems Japanese companies have during the internationalising process also need to be analysed.
Macro-economical Uncertainty, It just wants to change directly from broker to investment bank, which is hard to transfer its broking mindset to dealing one.
Language, Business Culture and Traditions, the main international market is controlled by English speakers. Because these same language speakers almost share the same history and culture. Considering this issue, Japanese is still not an international language or so-called 'world language', only used in domestic Japan. There also normally is a hierarchical culture in Japanese enterprise. This means that the staffs usually own conservative thoughts in business process. This question is not a good method for internationalizing, especially for investing. Furthermore, almost Japanese firms prefer to use performance-based salary structure rather than the widely used "fixed plus bonus" one. At last but not least, Japanese, including many investors, are only interested in their domestic markets, and financial products and services, not the international markets. This habit is shaped with the Japanese cultural development during these 1000 years. This mindset is not an easy obstacle in internationalization to overcome by banks.
Clients base, Japan banks do not have a good customer base to expand for a "pure" investment bank. On the other hand, Barclay's succeeded to expand itself from pure commercial bank to worldwide investment bank with a great number of customers in Great Britain and mainland Europe. Clients, Globalization of investment bank also means the globalization of its clients. Its clients have more opportunities and chances to choose other service supported by foreign financial companies. The competition becomes much higher than ever before.
What China Should Do
From the angle of macroeconomics, Japan relies too much on the consumption market of the USA. China should find another way. Independent development. Currently, China has replaced Japan as the biggest trade-surplus country in the globe. Facing up to the same situation of international economics and finance as Japan faced before, Chinese currency, Renminbi, Yuan, or CHY, should find a new path. The most important is that China must fully understand the big country status and strategic advances it owns. It would reject to push Renminbi into current order and structure of international economics and finance. To be specific, the instance that Japanese international financial assets suffered a great loss with Yen's appreciation under the USA's political pressure would not happen again on China. Moreover, there are also some path Chinese banks could do to avoid the same question faced by Japanese banks.
At first, in China, Most commercial banks have their own strong customer base. China has the greatest population and, easy to say, also bank customers, in the world. Moreover, all the banks have "too big to fall" doctrine that is widely accepted by Chinese and mainly domestic investors.
In addition, China has same language question with Japan. But Chinese is widely used in China, Taiwan, Hong Kong, Macau, mostly Singapore, and partly Malaysia. And some of these countries or areas are main developed markets for equities and foreign exchanges, i.e. Hong Kong and Singapore. With the expansion of Chinese, Chinese is becoming increasing used by people.
Finally, from the information in previous part above, the situation for Chinese banks to expand is a little better than those in Japan. With "opening-up" policy in China, Chinese investors can easily accept the new business structure and culture. As mentioned in the Part II, expatriate managers are another way to release the pressure from culture and language conflicts.
