Tokyo has nothing to fear from Big Bang: Comment

Miroshi Mitsuzuka, Japan's new finance minister, has chosen to announce the Japanese version of Big Bang, deregulation of financial markets, with this extraordinary incantation: "Now I am designated as commander on the front lines, with arrows and bullets falling around me like rain. If a bullet hits me, I could be injured, or even die. But I accept that". Eat your heart out Eric Cantona.

What Mr Mitsuzuka appears to have been saying, loosely translated, is that the proposals are likely to run into sustained opposition from powerful vested interests. As a result the plans are at this stage notably thin on detail and suitably long term (2001). In truth, however, political opponents would be well advised to forget their reservations and back the reforms wholeheartedly, for unless Tokyo changes soon and fast, it will slip so far behind New York and London that it will never catch up.

Tokyo is still one of the top three financial centres in the world, but only by virtue of the size of the domestic economy behind it and the vast capital flows that need to be recycled. Otherwise Tokyo as a financial centre is pretty much still living in the stone age. As a self-standing, internationally competitive organism, it is now so far behind London that the two barely stand comparison.

Fixed commissions reign supreme in securities trading and strictly enforced barriers still exist between securities operations and banks. There are even still some controls on foreign exchange transactions. Like so much else in Japan, Tokyo as a financial centre is a largely protected market place. The big US proprietary trading operations, like parasites on the pig's belly, thrive there, but they remain essentially barred from the inner sanctum.

The lesson of the City is that Tokyo has nothing to fear from deregulation and everything to gain. Weaker institutions will go to the wall, but stronger ones will prosper and grow larger still. Nomura will undoubtedly emerge even more omnipotent than it is already. The foreigners will invade in their hordes, but bring capital and expertise with them. Ultimately Tokyo will be the better. All this assumes Mr Mitsuzuka is serious, that this is more than hot air to appease foreign critics. But when the seagulls follow the trawler, it is because they think sushi might be thrown into the sea, as Cantona might have said.

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