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Japanese banking, a culture shock | Joris Luyendijk

Interviews with two bankers in Tokyo reveal interesting contrasts to London in approaches to finance – 9am to 5am job anyone?

For reasons unconnected to this blog I was in Japan recently, where I had the chance to speak to three people working in finance in Tokyo. They had such interesting things to say that I thought it would be a shame not to share them here. Please consider this a snapshot – no more, no less – of some of the differences and similarities between finance in Japan and in the west. It would be wonderful if readers, Japanese or not, with relevant knowledge used the comment thread to jump in and elaborate.

The big story in Japan these days still seems to be the tsunami and the nuclear disaster that followed at Fukushima, sometimes referred to as 3/11. It is hard to miss the parallels between the nuclear crisis in Japan and the banking crisis in the west. Not only are they often described with the same term, “meltdown”, the context is strikingly similar. In both cases you have a crucial part of the country’s infrastructure that is very complex and nearly incomprehensible to outsiders. It was consistently portrayed as safe by experts and the authorities. Then it blew up.

I met a number of Japanese journalists who were very distrustful of their government’s statements and promises about nuclear safety. Pervading their words was a sense that the political class was not on the side of the people, but in cahoots with the sector. Again a clear parallel with the west. One Japanese banker, who sat for an interview similar to others posted on this blog, works in equity finance for a major western bank. He said: “There is no real anger at bankers in Japan these days. I don’t hide from people that I work in a bank,” adding: “We don’t have Occupy tents in Tokyo. When there are demonstrations they are anti-nuclear, not anti-finance, at least for now.

The financial crisis had affected Japanese banks in a markedly different way, he continued. “It’s the world in reverse these days. In the 90s it was Japanese banks that had to sell many of those non-performing loans [bad sub-prime loans] to western banks – often at great profit for those western banks. These days, Japanese banks can make good money by buying bad loans at big discounts from distressed western banks.”

It was very interesting to see how the mores of the financial sector intersect with local customs in Japan, upending some while amplifying others. An investment banker explained how she ended up in finance, at least for a while. She had gone to study abroad, thinking this would improve her CV only to discover on her return that she had missed several rounds in the incredibly rigid recruiting system in Japan. “Recruitment in Japan is like a train,” she said. “You fail to get on and you’re lost.” There was one sector left in which such rules did not apply; finance.

The equity finance banker said: “We work even longer hours than bankers in London do. Tokyo is a very competitive market because you have all the banks you have in London or New York, but there are also the Japanese giants for whom this is their home turf. Then there’s the investment bank mentality of working long hours. Add to that the Japanese work mentality and you begin to understand why we sometimes joke that our job is 9 to 5; 9am to 5am.”

The full interview with the equity finance banker is here, and especially worth a read if you do not know what equity finance is, or “Chinese walls”.

The other person to sit for a formal interview was in corporate banking; he worked for a major western bank in charge of liaison with one of the biggest Japanese corporations. I had not yet spoken to a corporate banker for this blog, and was struck by just how complex the daily operations of major corporations have become in today’s global economy. Let’s call”‘my” corporation XYZ, the corporate banker said:

“Now XYZ has operations around the globe. It buys materials and half-products from lots of countries. It assembles and manufactures in lots of countries. It sells its own products across the globe.

“Imagine the money flows: across currencies, across time zones, across jurisdictions. Say XYZ wants to buy a factory in China. For tax reasons XYZ may have its ‘paper headquarters’ [registered office] in a haven like London, Amsterdam or Switzerland. This means that the payment has to go through there. So it starts in yen in Japan, is converted into sterling, Swiss franks or euros to originate in the country of the paper headquarters. Then it must be converted into dollars because Chinese renminbi must be paid for in dollars. So the payment alone moves through four currencies, but at what conversion rate? You have different currency markets operating in different time zones. The yen market closes before the London market opens. On what day should the transaction be credited? How does the transaction look to different regulatory systems in the countries concerned?

“You need to agree on a fee for all this, provide certification … In a transaction like this there may be at least three other banks involved. And don’t forget the need for ‘local information’. In some countries, official regulation can be quite different from how things are done in practice. I need to be aware of that and pass on relevant information to XYZ.

This must be one of the reasons that today’s financial sector is not a free market but an oligopoly of a handful of banks; scale is everything and the barriers to entry for newcomers are huge. The corporate banker elaborated: “A bank with global operations is at a huge advantage. When Japanese corporations expand overseas, they cannot do so using Japanese banks as these lack such global networks.”

This was actually a joint interview. There we were, a Dutchman and two Japanese men speaking in English about the global world of finance. One was eating pasta and the other a curry, while I was digging into my Japanese dish. It occurred to me that in many ways I had more in common with them than I had with many of the Dutch people who are supposed to form “my culture”.

The corporate banker said: “When I travel to New York, I am always struck by the percentage of white Caucasians in the banks there. Here in Tokyo it’s overwhelmingly Japanese. But in London you have the whole world population represented. I may go to a desk in a major bank and not find a single English person on the team. They may be from India, from Lebanon, from anywhere … That’s London.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds