Can the Japanese Make the U.S. Financial Crisis a Good Opportunity?

Japan’s finance groups have stood up one after another for reorganization of the world finance following the serious U.S. financial crisis. Mitsubishi UFJ Financial Group announced that it will invest in the U.S. giant Morgan Stanley by buying 20 percent of its stock at maximum and becoming the largest stockholder. Nomura Holdings, on the other hand, has agreed on buying the Asia-Pacific department of U.S. Lehman Brothers and has decided to buy its Europe and Middle East branch as well.

Mitsubishi UFJ will also invest additional 900 billion Japanese yen at most (approximately $8.4 billion) for (a third-party capital increase quota?) and dispatch a board director. By the 20 percent of the equity stock purchase , a part of Morgan’s profit will reflect (joint accounts? joint results? performance?) of Mitsubishi. Morgan has declared to transform into a bank-holding company while Mitsubishi is looking for cooperation with Morgan’s banking branch.

Earlier this year, Mizuho Corporate Bank, Ltd decided to invest in a U.S. securities firm Merrill Lynch by 100 billion yen (about $930 million) while Sumitomo Mitsui Banking Corporation financed the British bank Barclays by the similar amount. But the amount of capital and deep (participation? Intervention?) from Mitsubishi is at an unprecedented scale, following the financial panic due to bankruptcy of Lehman Brothers. This means Japanese offense is in a new phase.

This financial crisis due to subprime loans, a U.S. housing loan for individuals with below-average credit, dramatically changed the power structure of world finance. Financial institutions in the U.S. and Europe have faced financial difficulties by a huge lose due to the bad debt from subprime-related products which were once a source of high profit.The damage was fortunately shallow on Japanese financial groups as they did not invest in global business earlier, and it was not as profitable one as the Western ones.While the investment funds in newly industrialized countries are reluctant to spread capital due to fall on stock prices, Japanese banks perform relatively firm, and they are recognized as far more significant as a savior of the crisis.

It is said that the financial giants in Japan have received a number of offers on investment and cooperation from the U.S. and European institutions.How the other Japanese major banks, stock firms, and insurance groups intervene in this financial reorganization is worth paying attention. Although the end of the U.S. financial crisis is unforeseeable, it is probably preferable for the Japanese to participate in the reorganization at global scale while studying the risk well, for it will strengthen its financial competitiveness.

However, it is unclear if the Japanese can make the crisis a really good opportunity for them. What the U.S. and Europeans expect now is probably to build up capital and restore confidence for time being. It is imperative that the Japanese financial groups prepare for investing and cooperation with clear strategies on how they collaborate with the West and exercise the influence after recovering from the crisis. It would be troubling if they repeat the same mistake as the late 1980s, when they failed to secure a foothold in the U.S. financial market due to lack of know-hows on the management despite an enormous amount of ‘Japan Money’ injected into it.