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Japan's investment schemes market heats up
Publication Date : 11-06-2013
The battle for customers is intensifying among financial institutions ahead of the introduction of the domestic version of Britain’s Individual Savings Account (ISA) system, dubbed NISA, in January 2014.
The NISA programme, designed for individual investors, will offer tax exemptions on capital gains and dividend income from investments of up to 1 million yen a year for a maximum of five years. The “N” in NISA stands for Nippon (Japan).
Mizuho Bank has mapped out a policy to develop more than 20 kinds of investment trusts under the system together with US-based BlackRock Inc., the world’s largest investment management company, to market them from around August or September.
The launch is expected to be the largest of its kind in terms of the number of products marketed in such a short period, since major financial institutions have generally dealt with about 10 kinds of investment trusts a year.
Mizuho Bank is believed to be hoping to reach a larger customer base by offering a wide range of financial products.
Major banks other than Mizuho Bank are also considering ways to enhance their sales of such investment trusts. Mizuho Financial Group is aiming to sell about 600,000 NISA accounts, while Mitsubishi UFJ Financial Group and Sumitomo Mitsui Banking Corp. are targeting sales of 500,000 accounts each.
Against this background, Mizuho Bank is believed to have decided to offer a wide range of investment trusts through collaboration with BlackRock, which has made large advancements in the development and management of investment trusts.
The jointly developed financial products’ investment destinations will be shares and bonds both at home and abroad, including emerging nations in Asia.
The new products will carry the risk of a loss of principal but will be easily manageable even for first-time investors, as they simply move in tandem with the rise or fall of the 225-issue Nikkei Stock Average.
The products will only be sold online to keep the sales costs low and entice younger investors.
Industry faces challenges
Over a five-year period, the industry is hoping for total sales of 1.5 million NISA accounts. Among issues that need resolving to win over prospective customers is how the complicated system can be made intelligible to them.
Tax authorities will begin receiving applications for NISA accounts through banks and securities companies in October.
People hoping to use the NISA programme need to open an account prepared specifically for the system. Since one person can have only one such account, competition over accounts has been intensifying among financial institutions.
Umbrella banks and financial institutions of such major financial groups as Mitsubishi UFJ, Mizuho and Sumitomo Mitsui are set to enhance their cooperation to minimise the loss of customers. If a bank account holder hopes to invest in a kind of stock that cannot be dealt with by a bank, for example, an affiliated securities firm will take care of the customer instead.
In addition to the strengthened collaboration, financial groups are expected to lure customers through a promotional campaign.
According to Koji Nishimoto, managing director of Mitsubishi UFJ Securities Holdings Co., Mitsubishi UFJ Financial Group, which is hoping sell 500,000 accounts under the NISA programme, is considering a introducing a group sales campaign or a single financial product among group companies.
To lessen the burden on customers, Mizuho Bank will waive purchase commissions regarding investment trusts jointly developed with BlackRock.
Mizuho Bank will also try to keep the amount of trust fees charged for the operation and management of investment trusts low, in an attempt to afford customers more profits.
Mizuho Bank will start receiving early applications for the NISA account on Tuesday.
These moves are sending a wave of alarm through securities firms, which fear they may have no chance of winning in their specialised market if banks with a strong customer base strengthen their marketing strategies.
To cope with such moves, Nomura Securities Co. started a promotional campaign for customers applying for the account at the end of last month. Customers who made the application by July will get 2,000 yen in cash when the account opens.
Nomura Securities holds seminars at its branch offices on the NISA programme. The company said the seminars are so popular that far more people apply for them than it can handle.
Daiwa Securities Co., which is aiming to sell 1 million accounts under the NISA programme, said it has already received more than 100,000 applications for the NISA account over the Internet and through other means.
Daiwa will launch a campaign similar to that of Nomura and plans to sell several kinds of low-risk investment trusts, including shares and bonds, for first-time investors.
According to the Bank of Japan, cash and deposits account for about 55 per cent of household financial assets in the country, higher than about 15 per cent in the United States and about 36 per cent in the eurozone.
The central government is hoping to use the introduction of the NISA programme to broaden the investor base, luring more younger investors by accelerating the move “from saving to investment”.
But some observers said the new products are unwieldy. For example, customers have to base the relevant accounts at the same financial institution for at least four years.
The Financial Services Agency is thus considering how to change the relevant rules to allow customers to move their account from one financial institution to another every year.