The following translation was done with the aid of my brand new copy of the Nikkei Japanese-English Dictionary of Current Economic and Financial Terms, an amazingly helpful (if pricey at 9000 yen) resource for anyone who does business or finance-related translation. It was put together by the people who write Nikkei Net Interactive, Nikkei’s English-language news site, so it includes a wealth of examples taken from actual Nikkei articles on recent events.
Normally, I use a combination of 3 free online dictionaries — Eijiro, WWWJDIC, and goo’s Japanese-Japanese dictionary (Yahoo’s is useful since it has both 大辞泉 AND 大辞林). But I’ve noticed that it’s not always easy to get financial terminology all in one place, or in a format that can be easily used offline (so far my attempts to download a bunch of online glossaries and search them using Google Desktop have proven time-consuming and ultimately unsuccessful), so I decided to splurge on a dead-tree solution.
If you just want a reference that explains recent events in the Japanese economy in simple (Japanese-language) terms, I would recommend picking up the much cheaper Dictionary of New Economic Terms 2007. I picked up a used lite version of the 2006 edition at Book Off and it is already coming in handy.
Anyway, here’s an article on the consolidation in some of the major consumer credit companies that occured after long-running string of crimes and suicides by people in deep to usurious consumer lenders, along with 2006 Supreme Court decisions ruling that companies like Aiful could not keep loans made over the legal limits, caused the Diet and Financial Services Agency to crack down on consumer lending. Measures that were taken included, in no particular order:
1) Business suspension orders on lenders for using threats to collect loans;
2) a phased-out closing of the “gray zone” interest rate regulatory framework that allowed lenders to legally charge 30% annual interest (as opposed to the legal limit of 15-20%) as long as borrowers gave legal consent;
3) a ban on the practice of taking out life insurance policies on borrowers that will pay out if the borrower commits suicide (a standard Japanese practice);
4) allowing borrowers to recover interest retroactively that was collected over the 20% legal limit; and last but not least
5) A thorough public humiliation in the media.
Number 4 was a particularly large factor in the net loss of a whopping combined 540 billion yen by the nation’s top consumer credit companies. Now that the times of easy money are over for Japan’s lenders, only the most healthy companies will survive, and as you will read below there is intense competition among the megabanks to find and acquire the picks of the litter:
Ambitious Mitsui Sumitomo Takes a Step Toward Acquiring OMC Card
May 17, 2007 (from Shukan Toyo Keizai’s May 19 edition)
A shockwave is rocking the financial industry — an unprecedented “change of management.” Central Finance is leaving Mitsubishi UFJ and joining the Sumitomo Mitsui group. Observers are watching to see what effects this will have on the battle for OMC Card.
Not all is quiet on the consumer finance front. Central Finance, a former member of the Tokai Bank group, has decided to leave Mitsubishi UFJ. Its new partners will be Sumitomo Mitsui Financial Group and Mitsui & Co. (recently famous for building the new Tokyo Midtown building complex).
Here are the details of the new capital tie-up: First, SMFG (including subsidiary banks) and Mitsui & Co. will invest 19.4 billion yen in common stock and corporate bonds with equity warrants. After those bonds are traded in for shares, the total investment by both companies will rise to 20%. Meanwhile, Central Finance will buy 7.5 billion yen of common shares in Quark, a Sumitomo Mitsui-owned consumer finance firm. Central and Quark will then merge by September 2009.
Shockwaves continue to riddle the consumer finance and credit card industries over developments such as the lowering of the legally permitted interest rate for nonbank “cash” lending dictated by a revision of the law regulating non-banking moneylenders. Yet even in such difficult times, at least one president of a major consumer finance firm was “frankly surprised” to hear about this most recent capital tie-up, since such a “change of management” is almost unheard of in Japan’s financial industry, which prefers to build up tight group-oriented relationships in both both capital and personnel.
That is part of what makes this such a big gain for SMFG. Compared to the group’s rivals, Mitsubishi UFJ and Mizuho, SMFG faces a conspicuous lack of consumer finance capabilities. And it was no small accomplishment to successfully bring in Mitsui & Co. in this capital tie-up. Of Japan’s major trading companies, Mitsui has been a latecomer to investments in finance businesses. This has allowed the banking side to cooperate in Mitsui’s plans to get back in the game, thus putting Mitsui in SMFG’s debt.
Past Merger Plans Crushed
What was behing the decision by Central Finance President Tatsuo Tsuchikawa? A former UFJ Bank official explains: “When UFJ was [created by the merger of Sanwa and Tokai Banks in 2002], Tsuchikawa, who was the Executive Director for Project Planning at the former Tokai Bank, strongly objected to the strongarm integration tactics of former Sanwa Bank officials.” Central Finance held tight to its independent strategy even amid the rapid-fire merger. It charted its own course amid the Mitsubishi UFJ-owned credit/consumer companies, including NICOS, UFJ Card, and DC Card.
A top official at a rival company points out that “that’s not the end of the story.”
“Central Finance had entered merger talks with another card company before, but the move was stifled after opposition from Mitsubishi UFJ.” In fact, that company was OMC Card. OMC is currently in the eye of the storm of reorganiztion in the credit card industry. Daiei, which is currently undergoing management rehabilitation, is currently in the process of selecting a buyer for its 30% stake in OMC. SMFG is one of the bidders.
CEO Masayuki Oku of SMFG, outwardly denies a relationship between the new capital tie-up and the battle for control of OMC: “We have not even remotely considered (bringing the two companies together).” However, another senior staff member of the group reveals what are likely SMFG’s true intentions: “(OMC) will probably be happy about this new capital tie-up.”
The first round of bidding for OMC has already ended, and hearings including the top executives of the remaining bidders will be held in mid-May. SMFG is more than likely going to play up a growth scenario for OMC involving Central Finance.
And the benefits for SMFG don’t end there. Central Finance is generally considered a consumer credit form run by the former Tokai Bank, but a glance at the company’s history shows a unique character of support from influential Nagoya business people. The former Tokai is just one powerful parent of several. President Tsuchikawa is a major presence in the Nagoya business community, and is said to be close with the founder of Toyota. That would quickly shorten the distance between SMFG and the Toyota Group.
The economy of the Nagoya area, which is experiencing continued vitality, is considered friendly territory for Mitsubishi UFJ, which is the successor organization to Tokai. However, the drama surrounding this capital tie-up could change the lines of battle in the “financial wars.”
(by Osamu Namikawa)