HANZAWA Junichi, Chairman
Japanese Bankers Association

Chairman’s Inaugural Address

 Thank you, and hello, everyone. I’m honored to succeed Mr. Takashima as JBA chairman, and ask for everyone’s support as I strive to fulfill the role’s important duties.

 I also want to express my sincere gratitude to Mr. Takashima. This past year has been fraught with major unforeseen difficulties, including the COVID-19 crisis, the conflict in Ukraine, and historic high prices of natural resources. Mr. Takashima has done an admirable job leading our sector through these rough waters by tackling new and existing risks head-on. He has my deepest respect and gratitude.

 Today, I’d like to start by reviewing Japan’s banking environment. Due largely to COVID, the global economy was temporarily stagnant but is now on the road to recovery, thanks to normalization of economies in major countries based on a “Live-with-COVID” policy. This has improved consumer spending as one of its positive effects. On the other hand, China, which had managed a V-shaped recovery, still faces risks that could put downward pressure on the economy, such as the lockdown of major cities under a zero-COVID policy. The ongoing tension between the U.S. and China – which predates COVID – along with Russia's invasion of Ukraine, has renewed attention on geopolitical risks. These and other factors accelerated the spike in energy prices and contributed to various supply constraints at the global level. This exerts inflationary pressures globally, including in emerging economies. At the same time, we are seeing a shift toward monetary policy normalization in major countries.

 The Japanese economy shares some of these trends. We see gradual improvement overall, especially in service consumption, due to easing of various behavioral restrictions. On the other hand, the Ukraine conflict has heightened caution about foreign dependence on resources, food, and other goods. Combined with the current weak yen, these negative forces have appeared in the Japanese economy in the form of steeper prices on households and businesses due to higher import costs.

 To support ongoing growth despite these forces, the Japanese economy requires a sustainable society, and an environment highly resilient to climate change and geopolitical risks. To this point, it’s essential to spur innovation through investment in people and intangible assets. Banking customers looking ahead to the post-COVID era have already formulated strategies for sustainable growth over five years, ten years, and even beyond – and as some have even moved into the implementation phase, banks have committed to help them meet the challenges that surely lie ahead.

 Therefore I envision this fiscal year as one of “ supporting the creation of new value, and challenges for growth to build a sustainable environment and society” – a strategy supported by three key pillars.

 The first pillar is “contributing to the welfare and aspirations of customers and the larger society through a range of support measures beyond the provision of financial services.” We believe that for the Japanese economy to grow sustainably, and for various environmental and social issues to be resolved, banks must help customers face issues head-on by offering diverse services.
We will continue to place the highest priority on providing financial support, while also doing our utmost to help customers with guidance on rebuilding businesses and restoring fundamental profitability. And we will cooperate with government-affiliated financial institutions.

 We can provide new value as well, by taking advantage of deregulation of the scope of bank business. Each bank will continue to provide services that go beyond the traditional framework to meet the diverse needs of clients under the revised Banking Act that went into effect last November. It is also important to work with the industry to achieve carbon neutrality in order to build a sustainable society. We will support customers’ efforts toward decarbonization in every aspect, including financial.

 The banking sector has long believed that a shift from savings to investment is necessary for the Japanese economy to grow sustainably. With this backdrop, the Japanese government has announced it will draw up a “Doubling Asset-Based Income Plan” at the end of this year under a “New Form of Capitalism” and its importance is increasing. This means we will work with both the public and private sectors to improve investment management systems, such as NISA and iDeCo, and revise related tax systems to make them more useful. We will also focus on financial and economic education for young people and others new to investing.

 To promote asset formation, we need a system that allows us to offer customers a variety of financial assets that support wise choices. We will continue to request a review of regulations on information-sharing and product offerings. We will also work to develop an organizational, sales, and procedural system that factors in fiduciary duty, and to increase its awareness among all employees.

 We also need to encourage the creation of start-ups to help stimulate economic growth and investment demand in Japan. To support those who are considering starting a business, we will help review the management guarantee system and support system, focusing on business capability and future potential. In addition, the human resources that support business – and society in general – are essential to building sustainability. So we will help create a virtuous circle in which the growth of human capital leads to the growth of business and society by promoting our views and participating in discussions on disclosure regarding human capital strategy and investment.

 The second pillar is “establishment of a stable and convenient financial infrastructure through digitalization.” Japanese banks have a proud heritage of ensuring a resilient financial infrastructure that Japanese society relies on for stable, secure payment and settlement networks, even in the event of natural disasters. Maintaining this indispensable heritage is considered part of our mission as banks, and this commitment will remain fully intact into the future. However, we understand that with the advancement of information technology, consumers are demanding services that are even more convenient and diverse. We will respond to such needs and contribute to new efficiencies to Japanese society.

 Specifically, we will proceed with discussions to ensure interoperability with funds-transfer service providers in the Zengin System. We will open an electronic clearinghouse this Fall and move forward to fully digitize bill and check functions. We will consider concrete measures, including using the Zengin EDI system, for business-to-business transactions and accompanying settlements. Our aim is to bring about a digital society and improve efficiency as a whole. As we harness digitalization in the pursuit of convenience, we will also apply it to safeguard the public trust that banks have earned, for instance by fighting fraudulent remittances and financial crimes with new technologies such as crypto assets. We will engage in active discussions and issue clear opinions on central bank digital currencies, promoting Web 3.0 in the use of NFTs, and developing an environment that helps promote these technologies.

 The third pillar is “further enhancement of the financial system for increased resilience and reliability.” The banking sector has historically worked to maintain and improve a stable and sound financial system on a global basis – and this will continue, as we work to meet people’s expectations by building an enhanced financial system that is both reliable and resilient.

 Specifically, we will respond to the results of the FATF Fourth Mutual Examination of Japan. In light of the fact that Japan has been classified as an “enhanced follow-up country,” we will work through public-private partnership to establish a financial system that is trustworthy at international standards. In response to the threat of cyber-attacks, dependence on other countries for important resources, and the supply risks associated with that dependence – threats that have all grown in recent years – we will conduct appropriate operations in accordance with the Economic Security Promotion Act promulgated in May, and contribute to the strengthening of core infrastructure and resilience of supply chains. We will also be responsive to the ongoing challenges of international financial regulations, and establish more transparent and robust financial benchmark reforms.

 Finally, I would like to express my thoughts on the basic JBA policy for this year, which I framed earlier as “a year of supporting the creation of new value, and challenges for growth, to build a sustainable environment and society.” I understand the current situation is uncertain due to diverse, intertwined risks related to forces including the pandemic and geopolitics. To build a sustainable environment and society in these circumstances, we must ensure resilience capable of withstanding emerging risks and simultaneous crises, and to develop a social environment that rises to the challenges of new value creation and growth. The banking sector recognizes its universal role of ensuring safety and security – our source of trust bestowed by customers and society at large – and embraces its vital responsibility to support the Japanese economy on its path back to growth.

 With this in mind, I believe the paramount message of this fiscal year is for the banking sector to step up and directly face issues that clearly require action, and to identify worthy new challenges through our own initiative. As JBA Chairman, I will gladly take the lead in tackling these challenges and fulfilling my responsibilities in good faith. I ask your support and cooperation. Thank you.