'Big Bang' Creates Big Opportunities for Boston and US Financial Firms; Deregulation Opens Door to Lucrative Japanese Market According to PricewaterhouseCoopers

Business Wire, April 15, 1999

BOSTON--(BUSINESS WIRE)--April 15, 1999--

Japan's recent efforts to deregulate its financial system has created significant new opportunities for Boston-based and U.S. investment management firms, according to Edward L. Cameron, partner at PricewaterhouseCoopers LLP. Mr. Cameron gave his remarks at a symposium today sponsored by The National Investment Company Service Association and the Japan Society of Boston.

Japan's changing regulatory landscape is removing barriers that have long frustrated U.S. financial firms, Mr. Cameron said. Known as "Big Bang Financial Reform," Japan's Financial System Reform Law took effect December 1, 1998 amending 22 banking, investment trust and securities laws. Deregulation has led to new distribution channels, such as broker/dealers, banks, insurers and the Internet, through which foreign firms can sell their products. But Cameron said that Japan's government has also taken steps to ensure customers are protected. Before the new law took effect, audits were not required of investment trusts. Now all new investment trusts are subject to audits, and all investment trusts will be audited after a two-year transition period.

In addition, the Japanese government is expected to adopt by year-end legislation that will permit defined contribution plans.

"Boston-based investment management firms - with their reputation for prudence and their outstanding track records - are well positioned to enter the lucrative Japanese market," said Cameron. "Japan, with 135 million people, has about 51% of the population of the U.S., but its mutual fund industry has only 6% of the assets that the U.S. industry currently has so there are great opportunities for investment management firms wishing to do business there."

According to PricewaterhouseCoopers, Japan's savings rate is high, but 63% of these savings, or $7 trillion, is in cash or term deposits. It is estimated that every 1% move of household savings from cash and term deposits to the asset management industry represents $106 billion. "If Japanese savers can be convinced to save 2% of the gross domestic product in mutual funds, the result would be $86 billion in new money every year," Cameron said.

Currently, a wave of alliances is sweeping across Japan's financial industry, Cameron said, and U.S. firms will have to consider using similar agreements to enter this market. These agreements take the form of acquisitions, joint ventures, strategic alliances, distribution agreements and sub-advisory relationships. "Regulatory barriers have not been the only obstacle for U.S. financial firms," Cameron said. "There are also cultural barriers, but these alliances and partnerships can help companies overcome those issues."

PricewaterhouseCoopers' Investment Management Industry Services Group is a recognized leader in its knowledge of Japan and that country's investment management industry and its major service providers. PricewaterhouseCoopers' partners and managers serve on the Japanese Institute of Certified Public Accountants Committee, which develops "generally accepted auditing standards" and "generally accepted accounting principles" for investment trusts.

PricewaterhouseCoopers' Investment Management Industry Group has been providing business assurance and tax services to funds and fund companies around the world for more than 60 years. It serves many of the country's largest mutual funds, common trust funds, limited partnerships, private partnerships, hedge funds, pension funds, annuities and unit trusts. PricewaterhouseCoopers audits more than 2,500 mutual fund portfolios, which represent $2.7 trillion in net assets, giving the firm a 59% share of the U.S. market according to Lipper Analytical Services. PricewaterhouseCoopers also assists clients in developing the tax structure, technical applications and internal controls and regulatory compliance procedures that optimize performance.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's leading professional services organization. Drawing on the knowledge and skills of 155,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance. PricewaterhouseCoopers refers to the U.S. firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization.

Since 1962, the National Investment Company Service Association (NICSA) has provided leadership and innovation in educational programming and information exchange within the worldwide mutual fund industry's operations sector. Located in Wellesley Hills, NICSA is a forum for mutual fund operations and shareholder servicing professionals.

The Japan Society of Boston is a non-profit, educational organization dedicated to strengthening U.S.-Japan understanding in New England. It is the only major regional institution devoted exclusively to fostering economic and cultural ties between the countries and serves as a resource center connecting a rich network of Japan-related business, education and cultural organizations and individuals. Some 150 corporations and 800 individuals are currently members.