Monday, June 20, 2005

It just goes to show you...

Coming on the heels of my last post, a story in todays Financial Times (FT) talks about a new law covering corporations that has foreign investors up in arms. Basically, the law would make the current of situation of foreign-owned financial firms in Japan unclear. In the world of finance, as heavily influenced as it is by government regulation, such a lack of clarity, and the risks that it poses should this lack of clarity lead to any inadvertent violations of rules or regulations, makes this a real risk for foreign banks, securities brokerages, and their ilk.
One of the interesting parts of this is that they totally missed it, so that their protests came rather late. The ACCJ also missed it. In my dealings with them, this doesn't surprise me very much: The competence of many of those in the organisation is, in my rather biased opinion, suspect. Whether this fiasco pushes any of it's corporate members to withdraw is a question, but they can't be too happy about it.
I think the bigger question, though, is what the hell the Ministry of Justice bureaucrats are thinking. In the current investment climate, Japan is a gamble at best. So is China, but that gamble has paid very hefty dividends, while the gamble on Japan may help a company maintain position, but has not paid out a lot of direct dividends. So, which country would you invest in?
This comes on the heels of a new privacy protection law which, while it has an admirable aim--to limit the access of companies to individual's private details unless they are specifically authorised to do so--it incurs large costs, legal headaches, and unfair singling out of certain companies by the media and bureaucrats.
The answer to what the geniuses at the MoF were thinking is that they weren't: Unlike China or most other Asian countries, foreign investment has traditionally played a fairly minor role in Japan, and there is very little sense that creating an unfriendly environment is something they need to worry about. They forget that foreign investment into Nissan helped save a company that no Japanese company wanted to touch with a ten-foot pole. They forget that Shinsei Bank, which was formed by Ripplewood Holdings, a foreign investor, is the best-performing Japanese bank. They remember that Lehman Brothers helped to finance Livedoor's hostile takeover attempt of NBS. And now they are extracting their pound of flesh. In their capricousness, and their hidden agendas, one must wonder what distinguishes them from the communist party functionaires in Beijing. The answer would be that if both sets of bureaucrats were on stock options, the Chinese would be smiling, and the Japanese would not...;-)

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