Takashima Makoto, Chairman
Japanese Bankers Association

New Year’s Message

 As we celebrate the start of 2020, I would like to share my thoughts on what’s happened and what lies ahead.

 Looking back on the year 2019, the global economy slowed down moderately. In October 2019, the IMF in its world economic outlook had estimated the 2019 real GDP growth as around 3.0%, the lowest since the recent financial crisis. This was attributed to the increased tension on the global supply chains that affected manufacturing activities, which was brought about by trade conflicts, mainly between the U.S. and China, and geopolitical risks, including Brexit. These uncertainties are still weighing down on the real economy.

 Against such a backdrop, central banks across the world have turned to monetary easing from a preventive perspective. In fact, the Federal Reserve cut policy interest rate in 2019 after hiking steadily until 2018.  

 Turning to the Japanese economy in 2019, employment and consumption remained favorable, while the slowing global economy depressed the sentiment of manufacturers. A series of countermeasures to the consumption tax hike, such as the point reward program for cashless payments, appears to have mitigated any major backlash. On the other hand, after three years of the Bank of Japan’s negative interest rate policy, the banking industry is struggling with a tougher yet environment, notably the ever-shrinking interest spread and lower return from assets.      

 Under these circumstances, since I assumed the JBA’s chairmanship last April, we have been promoting three pillar initiatives in order to make this fiscal year one that contributes to the resolution of economic and social challenges of the new era. Allow me to elaborate on some examples.  

 First, as part of the first-pillar initiative (“to work towards solving economic and social issues”), we enhanced multilingual support for foreign employees, who were expected to increase following revisions in Japanese immigration legislation that came into effect last April. Another significant issue is supporting elderly persons, particularly those suffering from dementia. Furthermore, childhood poverty is also a serious issue in Japan. On this, we organized an informational seminar to raise awareness among our member banks. Going forward, we will accelerate our initiatives to work towards solving economic and social issues.

 Next, the second-pillar initiative (“to build a safe and secure financial infrastructure utilizing digital technology”). We are working on sophisticating settlement and payment processes. This includes transitioning to a cashless society and promoting open API and XML messaging. Also, while we have a variety of new entrants to financial services, a function-based and cross-sectoral regulatory framework is still in development. This remains critical in promoting innovation while ensuring customer safety and security. We will continue to engage with various stakeholders and work on details of implementing the principle of “same activity, same regulation.”

 Finally, the third-pillar initiative (i.e., “to maintain and enhance the trustworthiness and soundness of the financial system”). Here, addressing “Market Fragmentation” resulting from jurisdiction-specific regulations remains a central issue, and we continue to be actively involved. Also, enhancing AML/CFT capabilities requires continued commitment and constant upgrading on the part of the financial institutions, even after the conclusion of the FATF’s fourth round of mutual evaluation on Japan in 2019. Furthermore, we set up the Working Committee on Interest Rate Benchmark Reform last year in anticipation of the permanent discontinuation of LIBOR at the end of 2021. The Committee is comprehensively examining and evaluating issues associated with transition to alternative rates, notably the risk-free rates. We must balance the needs of our clients with maintaining the stability of the Japanese financial system, and we remain committed to supporting the initiatives of the various market participants.

 As you can see, our work on the three-pillar initiatives indicate that none of the challenges faced by the banking sector can be easily resolved. Here, as a Japanese saying goes, even raindrops can chip away a stone over time. Similarly, the challenges we face must be addressed step by step and with persistence and commitment.

 In 2020, Tokyo will host the Olympic and Paralympic Games. All eyes will be on the athletes, and people around the world will look to them for inspiration and encouragement. At the same time, we all remember the tremendous amount of work and the incredible challenges these athletes have gone through before appearing on the world stage. Similarly, our resolve to take on the challenges posed by the uncertain business environment should not waiver in the face of difficulty. Nor should we cling to old ways or fear changes. We must keep asking ourselves what role the financial industry should play in the new era and how we can contribute to the resolution of economic and social issues of Japan.

 In closing, I hope that 2020 brings great progress and prosperity for all of you.