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Financial sector in Japan - statistics & facts

As the third largest economy in the world, Japan is home to a stable and well-regulated financial sector, which accounted for four percent of the nominal GDP in 2020. Financial and economic activity in Japan is centered around Tokyo, the world’s largest city by GDP, that recently has expressed its ambitions to become a global financial hub.

Key financial institutions in Japan

The financial sector is comprised of a variety of financial institutions, such as banks, insurance companies, and securities firms that act as financial intermediaries and provide financial services and products to corporations and retail customers. The Financial Services Agency oversees financial institutions as Japan’s primary regulatory body to ensure the stability of the financial system.
The Japanese financial services sector is dominated by three financial groups: Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group. These financial groups have Japan’s three megabanks and other financial service units under their umbrellas. Next to retail banking, they engage in large-scale operations with major corporations in Japan and overseas. Other key players in the banking and insurance industry are subsidiaries of the Japan Post Group which is partly owned by the government. With more than 20 thousand branches all over Japan, Japan Post Bank is one of the largest banks in the country, and Japan Post Insurance is among the leading life insurance companies in Japan. In addition to various financial institutions, non-financial institutions such as retailers have started offering financial services to consumers since the late 1990s.

Development in recent decades

The finance and insurance industry in Japan has experienced several financial crises over the past three decades. The burst of the speculative asset price bubble in the early 1990s was followed by a decade of recession, the so-called lost decade, and resulted in a non-performing loan problem and the collapse of private financial institutions. Between 1996 and 2001, the government introduced a series of reforms that were referred to as the Japanese version of the financial big bang, and aimed for the deregulation of the Japanese finance sector. The liberalization of the finance sector facilitated competition between financial institutions and lifted the ban on certain financial instruments.
Over the past decades, Japan’s central bank, the Bank of Japan has pursued a continuous policy of monetary easing. As a result, financial institutions in Japan operate in an ultra-low interest rate environment that affects profitability. With digitalization and fintech on the rise, the industry faces competition from new businesses entering the market and offering alternative services to consumers. Recently, efforts to increase the attractiveness of Japan as a global financial hub, with Tokyo at its core, have accelerated, resulting in a number of policy initiatives aimed primarily at facilitating entry to the financial and capital markets for foreign financial institutions and assets managers.

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