TOKYO has struggled for years to pitch itself again as a major financial hub, but its ambitions might be saved by what Homer Simpson once called the two sweetest words in the English language: “De fault.”
The city’s been trying to recover from a reputation that’s taken a battering.
Having once been a capital of the financial world, last month it tumbled out of the top 20 in one ranking of banking centres, behind the likes of Asian rivals Seoul and Beijing.
Shenzhen, barely a dot on the financial map when Tokyo’s markets were at their peak three decades ago, now ranks nine places higher.
Various attempts to woo foreign traders have come up against some inalienable truths that even the likes of governor Yuriko Koike have struggled to fix: A large taxation burden compared to Hong Kong and Singapore, the fact that Japanese and not English is the language of both day-to-day life and bureaucracy, as well as a maze of red tape.
There are green shoots suggesting that Tokyo might now be looking more attractive – if for no other reason than the fact that its main rivals look worse.
Ken Griffin’s hedge fund, Citadel, is planning to set up in the city for the first time since the global financial crisis, Bloomberg News has reported.
That follows the arrival of market-maker Citadel Securities, a separate entity founded by Griffin, to the capital last year, one of nine financial firms that secured licences in 2022.
Most recently, Steve Cohen said his Point72 Asset Management is increasing its staff there by 20%. It’s a small start, but a start nonetheless.
After Japan’s lengthy closure to the world during Covid, the country is getting another look. Warren Buffett gave his seal of approval earlier this month with his first visit in 12 years, citing a “strong feeling” that the market will continue to grow over the next half-century.
But if Tokyo does recover its financial mojo, it won’t be due to the push spearheaded by the FinCity Tokyo organisation to promote its appeal.
When that group was formed in April 2019, something more influential was happening elsewhere: The pro-democracy protests in Hong Kong. Four years later, things look quite different.
The city may now be recovering from its pandemic-era constrictions, but it’s been diminished as an international hub, and Beijing has revealed the hollow nature of its promises over the One Country, Two Systems policy.
Hong Kong’s population is in decline as expats leave, evidenced last week by a 12% drop in foreign students enrolled at international schools.
On the mainland, cities such as Shanghai, Beijing and Shenzhen may be climbing in financial centre rankings, but the Covid-Zero era and its chaotic ending spooked many.
So too have the worsening relations between the United States and China, and talk of war over Taiwan.
While the risk may be low, the sporadic arbitrary detention of foreigners also weighs on the minds of expats, after Canadians Michael Kovrig and Michael Spavor were held for nearly three years.
Just this month, an employee of Japan’s Astellas Pharma Inc was the latest to be arrested.
Low-tax, highly safe Singapore has been the logical winner from this – almost too much so. It’s suffering from its own issues, most notably a dizzying surge in housing costs amid limited supply.
Rents jumped 30% in 2022 alone. The city-state is also trying to balance attracting foreign talent with domestic concerns over a wealth gap, while visa quotas make it difficult to accommodate everyone looking to flee Hong Kong.
That opens up a window for Tokyo. As visitors return in droves for the first time in four years, they tend to remark upon how the city is defying a narrative of terminal decline.
A building boom that continued during the pandemic means the city looks better than ever. Indeed, it is one of the few major, developed metropolises that also builds.
Tokyo’s five major business wards will add 8.2 million sq ft of new office space this year, with redevelopments of the Toranomon business district and tech-friendly Shibuya nearing completion.
The rental market is running hot, with supply at an all-time low, according to one survey, yet the city is still surprisingly affordable. — Bloomberg
Gearoid Reidy writes for Bloomberg. The views expressed here are the writer’s own.
