22 May Japan Sectors: A Target for Australian Expertise?
Australian service sector firms could well look at targeting opportunities in financial servicesand healthcare – that’s an inference from reading the most recent 140 page Japan market ‘opus’ from McKinsey “The Future of Japan: Reigniting Productivity and Growth”.
Understanding Risk
On Japan’s financial sector it says: “Japan’s financial sector was the third-largest in the world in 2012, with $11 trillion in assets. But its low-risk, low-margin operating model has produced limited revenue growth. More than half of personal financial assets are held in cash or cash deposits.”
During Japan’s long period of muted demand, banks tended to funnel excess cash into low-risk, low-return [Japanese] government debt.
Major factors driving this gap include low returns on assets, risk aversion, simpler product offerings, and intense competition that has driven down pricing. Japan’s persistently low interest rate environment has limited spreads and depressed returns on investments—and because loan demand has stagnated, banks have been unable to compensate for declining interest margins by boosting volumes.”
Of course, unlocking the wealth management market in Japan, whilst identified as a great prospect, is not without its challenges. But Australia has had a history of innovative product design.
Group initiatives such as the upcoming Australian Financial Services Mission to Japan – June 9-11, 2015 – organised by the Financial Services Council together with the support of the AJBCC and the JABCC (more following) is an opportunity to start engaging with this sector.
(to be continued)
- Next Japan Business Alert, we look at McKinsey’s appraisal regarding Healthcare.
- Background: In 2011 McKinsey published Reimagining Japan – a collection of thought pieces by eminent Japanese and Western business leaders.