I am KATO Masahiko of Mizuho Bank. It is my honor to succeed Mr. Hanzawa as JBA Chairperson, and I humbly ask for the support of all present as I undertake the crucial duties of this role.
Before I share my vision, I would like to take this opportunity to express my sincere gratitude to Mr. Hanzawa.
The past year witnessed heightened inflationary pressures globally against a backdrop of supply constraints, rising energy and food prices, triggered by Russia’s invasion of Ukraine, and tightening of the labor market. Such conditions motivated various countries to pursue a policy of monetary tightening, which in turn led to widening of the interest rate gap between Japan and the United States, followed by major depreciation of the yen.
Mr. Hanzawa has demonstrated superior leadership and done an excellent job leading our sector through these rough waters by tackling a variety of challenges head-on. I hold him in the highest esteem and offer my deepest respect and gratitude.
Now, I would like to commence by reviewing the banking landscape in Japan. To begin with, I will address three megatrends.
The first is the changing demographic structure. While the global population exceeded 8 billion last year, the number of births in Japan fell below 800,000 for the first time. This trend of declining birthrate and an aging population has led to a reduction in the working population and a shortage of labor.
The second megatrend is the acceleration in awareness of sustainability. Climate change risks and the COVID-19 crisis have brought greater awareness to environmental and social issues, compelling individuals to reassess their values and prompting the cultivation of a co-creative mindset.
The third megatrend is the advance of digital technology. While the convenience of digital technology generates new values and needs, facilitating adaptation to new work and living styles in the COVID-19 crisis, the degree of dependence on this technology in society continues to grow.
Against this backdrop, growing geopolitical risks and intensifying conflicts, such as the Russia-Ukraine crisis and friction between the United States and China, have created issues such as fragmentation of supply chains and friend-shoring.
Meanwhile, global society is becoming increasingly complex, given that human interactions and information and value flows across national borders are accelerating in the digital world.
Given the advance of these megatrends and transformations in the global society, regional economies and societies are confronted with worldwide inflationary pressures manifested through energy concerns, higher prices for raw materials and higher wages. These challenges are forcing countries to rethink their policies of monetary relaxation.
In key regions such as the United States, the effects of monetary tightening are starting to emerge gradually, in line with hikes in the policy interest rate; for example, interest rate-sensitive housing investment is declining, and capital investment, especially IT investment, is weakening.
In Europe, although energy issues have settled within expectations, consumption remains stagnant due to the high level of inflation, and monetary tightening is being maintained due to wage inflationary pressures. More recently, events such as the collapse of regional banks in the United States and the management troubles of Credit Suisse are appearing to be the result of monetary tightening.
In China, consumption-driven recovery is anticipated following the lifting of Zero-COVID policy, however, conditions in the real estate market remain weak.
Conversely, Japan’s recovery from the COVID-19 crisis is lagging behind that of Europe and the United States, due to delayed recovery of the economy and shortage of materials such as semiconductors. Accordingly, there is still room for improvement, and gentle growth is anticipated. On the other hand, the economic slowdown arising from the aforementioned hikes in policy interest rates in Europe and the United States, as well as recession in China’s real estate market, are also causes for concern in Japan’s economy. The outlook remains uncertain, including future trends in wage increases and the effects of monetary policy.
Amid the uncertainty caused by these changes in demographic structure, climate change, growing geopolitical risks, and the various problems that derive from these issues, the government has set out a comprehensive economic package and various other measures under the banner of a "new form of capitalism" to overcome such future unease. It is the duty of the banking sector to align with such developments and provide both financial and non-financial support to address Japan's issues.
Given this environment, I envision 2023 to be "a year for supporting sustainable social and economic development for a brighter future" – a strategy supported by three key pillars.
The first pillar is "contributing to sustainable economic growth and resolution of social issues". Specifically, we will continue to direct our fullest efforts to support SMEs addressing issues such as the aftermath of COVID-19 and price inflation. We will leverage our financial intermediation and consulting functions to provide financial support in cooperation with government-affiliated financial institutions, and assist business succession, business revitalization support, and regional revitalization, among other initiatives. We will also work to provide funding for start-ups, which are essential for stimulating Japan's economic dynamism and growth. Moreover, we will review our support systems, focusing on business capabilities and future potential, and further promote financial practices that are not dependent on management guarantees.
Furthermore, to realize a virtuous cycle of finance to facilitate stable asset formation in households, we will focus on financial and economic education for young people, reinforce the promotion of NISA so that it becomes an entrenched part of the consumer investment landscape, and implement fiduciary duty.
Finally, to build a sustainable society, we will support structural transformation toward the decarbonization and carbon neutrality of customers through sustainable finance initiatives.
The second pillar is "establishment of a safe, stable and efficient financial infrastructure through development of digital technology". By actively utilizing digital technology, we aim to build safe and convenient financial infrastructure that can respond to critical labor shortages and changes in values and lifestyles accelerated during the COVID-19 crisis. Specifically, we plan to improve work efficiency in companies by fully digitizing bill and check functions and enhancing the efficiency of tax and public utility payments. This will enhance taxpayer convenience and reduce the burden of office work in local public authorities. In addition, we will explore the promotion of Web 3.0 and engage in discussions on central bank digital currency to further develop our digital infrastructure.
Meanwhile, it is also important to prepare for various risks that may materialize due to society’s growing dependence on digital technology. We will strive to secure safety and security for users by taking steps to prevent damage from fraudulent remittances and financial crimes with new technologies such as crypto assets, and to address cyberattacks, which are becoming increasingly threatening and damaging.
Finally, the third pillar is "enhancement of a sound and resilient financial system". In light of transformation in the global society, as indicated by heightened geopolitical risks, together with the increasingly rapid development of new economic blocs and supply chains, we will aim to further enhance the soundness and resilience of financial systems. Specifically, among other initiatives, we will strengthen capacity to take money laundering measures throughout the entire banking industry, utilizing the "Cooperation agency for Anti-Money Laundering" that was established last year, and secure the stable supply of core infrastructure services through measures related to the Economic Security Promotion Bill. In addition, by responding to the challenges related to international financial regulations and reform of financial benchmarks, we will prepare for future potential financial crises. We will also work on enhancing the corporate value of member banks by strengthening non-financial information disclosures such as regarding human capital.
Finally, I would like to reiterate my thoughts on the basic policy, in which I framed 2023 as "a year for supporting sustainable social and economic development for a brighter future". This year is a significant milestone as it marks the 150th anniversary of the establishment of the Daiichi National Bank, which was Japan’s first bank. Over the years, banks have contributed to Japan’s growth. We face ongoing uncertainty due to changes in demographic structure, climate change, growing geopolitical risks, and the various problems that derive from these issues. For banks to continue supporting the sustainable development of society and the economy, our basic policy aims to navigate a path for resolving as many of these challenges as possible, thereby dispelling future anxieties and leading to a brighter future.
As JBA Chairperson, I will gladly take the lead in tackling these challenges and fulfilling my responsibilities. I sincerely ask your support and cooperation.