What do Japanese corporate finance officers think of the foreign bankers competing for their business? If praise could pay the rent, the foreigners would have no need to worry.
At Toshiba, where they make a point of seeing almost every banker who telephones, the general manager in the international finance division, Nobuyuki Horiuchi, said: “My first impression when I came into this job last year was of how many guests from foreign banks and securities companies we received every day. We think competition in the electronics business is tough — but it’s nothing compared to the financial services industry.”
Horiuchi added that Toshiba maintained relationships with over 20 foreign banks. “They are a valuable source of information regarding financing and general economic conditions abroad. They keep us informed on the latest financial instruments, and sometimes we can use their worldwide network to get quick information about investing short-term funds. If we want to know what is going on in Iran, Argentina or South Africa, we will call a foreign bank.”
Like several other Japanese financial officers, Horiuchi praised the foreigners for speeding up some necessary changes. “In the past there were too many restrictions here in, for instance, segregation of internal and external accounts, and the foreigners have undoubtedly helped to break down some of the barriers.”
Mitsui OSK, the Tokyo-based ocean transport company, is in more need of help from foreign bankers than most other Japanese corporations. It has 300 vessels, several of which have to be replaced every year. The company has financial management subsidiaries in Luxembourg and Amsterdam and is considering setting up similar operations in London and New York.
Kiichiro Aiura, president of Mitsui OSK, was enthusiastic about the foreign banks. “They can give us more and better services than the Japanese banks. We have old friends among the Japanese city banks, of course, particularly Sumitomo and Mitsubishi, but the foreigners give us quicker and more detailed information. They help us with new techniques — currency swaps, for instance. In foreign exchange dealing, sometimes the foreign banks can give a better service. They work later — in many cases in two shifts. We get a good rate and low commission.”
Toshiyuki Kozeki, deputy general manager for finance at Japan Air Lines, commented: “We have found foreign banks very innovative, in things like swaps, for instance. They have certainly helped change our markets for the better.”
JAL benefited particularly from the abolition two years ago of rules that barred Japanese companies from conducting foreign exchange deals that were not directly related to physical transactions. Kozeki said: “Thanks partly to pressure from foreign banks, the market has been opened up so that we are now empowered to take positions in foreign currencies. That is very important to us. We deal a lot in foreign currencies and we can estimate what our flows will be. We constantly have a surplus in currencies like sterling and we may want to sell these currencies forward.”
At the electronics firm NEC there was less enthusiasm. Chishiro Tsuneoka, senior assistant to the chief financial officer, said that the company still valued long-term relationships. “We have nearly 50 Japanese banks and 10 foreign banks — and the proportion of our parent company’s business they have has not varied very much over the years. If a bank offers us finance at lower than the market rate, we don’t grab at it. We started with those Japanese banks and 15 or 20 years ago, when we needed cash, they gave it to us.”
What does a foreign bank have to do, to get NEC’s custom? “If a foreign bank new to Tokyo is very keen to see us, we will make an appointment,” Tsuneoka said. “But we want to have time to evaluate them — three to five years, perhaps.”
This is the attitude which makes life an uphill struggle for the foreigners.
“To be a foreign banker her is an extremely disheartening business,” said Robert Burghart, Tokyo research chief of W I Carr. He added that the difficulties were felt most acutely by newcomers. “Most companies here are cutting back their banking ties. They prefer to have strong relationships with a limited number of banks, rather than dribble away their business on marginal banks. A lot of foreign bankers are now asking themselves why they are here.”
Remy Caillaux; chief representative of Paribas in Tokyo, pointed out that the very success of Japanese industry had circumscribed the foreigners’ opportunities. “Many Japanese companies now have far less need to borrow than they used to.”
Simon Narroway, deputy general manager for corporate finance in Kleinwort Benson’s Tokyo office, could see a helpful trend. “We are going to see more transaction-oriented banking. Japanese companies are being educated and are becoming much more internationally minded. In many cases people moving into top management in these companies have already spent stints overseas.”
Narroway agreed that newcomers had difficulty in even getting an appointment. “The way in is to say you have something new to offer. But you get only one chance. If you don’t impress them you won’t get in again.”
The foreign banks have a big new market for M&A advice, according Neil Benedict, vice president in charge of corporate finance at Salomon Brothers Asia. Not that Japanese companies have taken to buying one another; what they want is to buy foreign firms. “Acquisitions for them in North America and Europe are an area of opportunity.”
“If you have a cheaper source of financing or a good investment idea. Japanese CFOs will look very seriously at it,” Benedict added.
What advice have the Japanese to offer the foreign bankers? On one point most of them agree: it helps if the foreigners take the trouble to learn Japanese.
“That is a good sign,” said Horiuchi of Toshiba, “not so much because it helps us communicate with them — we always speak to them in English — but because it is obvious theya re taking a longer-term view of Japan. In the past, bankers came here for a tour of duty of about two and a half years, and that is too short.”