I am HANZAWA Junichi of MUFG Bank.
It is my honor to succeed Mr. FUKUTOME as the JBA Chairperson, and I humbly ask for the support of all present as I undertake the crucial duties of this role.
Upon assuming my office, I would like to take this opportunity to express my sincere gratitude to the former Chairperson, Mr. FUKUTOME. Looking back on the last fiscal year, we began to see clear signs of positive momentum in the Japanese economy, such as large-scale wage increases supported by strong corporate performance. On the other hand, geopolitical tensions persisted globally, and many national elections delivered harsh verdicts against incumbent governments, leaving an uncertainty about the future. Amidst such circumstances, former Chairperson, Mr. FUKUTOME, provided strong leadership for the banking sector, aligning closely with key national policies such as the Policy Plan for Promoting Japan as a Leading Asset Management Center, and promoting important initiatives including household asset formation and stronger support for businesses. I would like to express my sincere respect and gratitude for his efforts.
Let me now turn to the current environment surrounding Japan's banking sector. In the global economy, inflation is calming down through monetary tightening and other policy responses, and financial policy is now beginning to shift toward easing. With expansion in labor markets and incomes serving as a foundation, countries are exploring a return to growth. At the same time, there are risks such as U.S. tariff hikes and the series of retaliatory tariffs they trigger, which increase the risk of stagnation in free trade. Additionally, the stagnation of the Chinese real estate market and ongoing geopolitical instability remain, so we must remain vigilant.
In Japan, we are witnessing increasing signs of a break from the prolonged stagnation known as the "lost three decades," with a renewed push toward an autonomous and sustainable growth trajectory. In the past, Japan's economy, mired in prolonged deflation, saw a strong trend toward cost-cutting, which led to a state of contracted equilibrium. Today, with historically high corporate earnings and rising prices, wage is growing on a scale unseen in the past 30 years.
Against this backdrop, companies are becoming more proactive in investing to solve societal issues and drive future growth, while households are increasingly engaging in asset formation to ensure a prosperous life ahead. This is a great opportunity to shift to a value-creating growth model. As the economic environment improves, Japan is now entering a new era of a "world with interest rates." Amid prolonged periods of tough low interest rates, the banking sector has made significant efforts to reduce costs and improve efficiency. With the economic trend now turning and Japan moving in a more positive direction, we step up its contribution by improving the quality of services, problem-solving capabilities, and consulting skills in order to better meet the needs of society and our customers.
With this understanding of the environment, I would like to position this fiscal year as "a year to contribute to accelerating Japan's growth and solving social challenges, laying the foundation for a vibrant future," and proceed with JBA's initiatives along the following three pillars.
The first pillar is to "accelerate the virtuous cycle of growth and distribution through revitalization of the investment chain." In Japan, where the population is expected to continue declining, bold investments to boost productivity are essential for sustainable growth and continued prosperity. We materialize growth investments, such as those in GX and DX, and mobilize all possible financing methods, such as indirect finance through banks, financial intermediation through the asset management business, and direct finance via capital markets to meet the enormous demand for funds. This contributes to the various initiatives promoted by the government to establish Japan as a Leading Asset Management Center. We are fully committed to revitalizing the circulation of funds among households, businesses, and financial intermediaries to further accelerate the emerging virtuous cycle of growth and distribution.
To support startups, which is the engine of economic vitality, we will encourage member banks to use the Lending Practice Handbook published by JBA in February this year. We will also step up discussions on the practical issues surrounding Enterprise Value Charge, which is a collateral system encompassing all business assets including intangible assets and is expected to be utilized in the context of startups and corporate turnarounds, with a view toward its implementation in the next fiscal year.
A stable and efficient energy supply is indispensable for sustainable growth and the maintenance of a prosperous people's lives. Japan's new Strategic Energy Plan aims to simultaneously achieve energy security, economic viability, and decarbonization, by fully utilizing zero-emission power sources. The banking industry will support this structural transition through sustainable finance. In addition, we need to begin long-term discussions on how to finance the massive investment demands expected to arise, that is an all-Japan challenge requiring collective effort.
To households, the providers of funds, we will continue to offer diverse asset formation options such as the new NISA and iDeCo. We will also proactively express our opinions on necessary revisions to regulations and tax system to further promote the shift from savings to investment, if necessary. Furthermore, we will work continuously on financial and economic education in partnership with the Japan Financial Literacy and Education Corporation (J-FLEC), targeting a wide range of people.
A key prerequisite for customers to feel secure in managing their assets is the thorough implementation of fiduciary duty by financial institutions. In this regard, we agreed on information sharing between product developers and sellers based on the Principles for Customer-Oriented Business Conduct and the Supplementary Principles for Product Governance. Going forward, we will deepen collaboration with product developers in line with this agreement to further develop customer-oriented business.
While strengthening the circulation of funds through these initiatives, we must also think about what financial intermediation structures, players, and systems should look like ten years from now. In addition, the banking sector will support efforts to ensure that all employees can maximize their performance by formulating action plans to eliminate gender-based wage gaps across member banks.
The second pillar is the "realization of a safe, secure, convenient, and modern financial infrastructure." Financial infrastructure, including payments systems, is a critical foundation that supports society and the economy. We remain committed to providing secure and reliable financial infrastructure. At the same time, as digitalization progresses and new technologies such as AI emerge, we will pursue not only safety but also greater convenience.
In March this year, we announced that from the start of FY2027, the exchange of bills and checks at electronic clearing houses will be abolished, and that the current electronic clearing house system will not be updated. We will proceed steadily with the necessary measures to reduce costs and risks and improve productivity in both the industrial and financial sectors, positioning this stage as the culmination of our efforts.
Regarding the Zengin System, in response to the system failure that occurred in 2023, we have been working to strengthen and revise organizational structures and operational processes. While ensuring stable operation, we are also preparing for the API gateway, scheduled for launch this November and developing the 8th-generation Zengin System, scheduled for release in 2028.
With the ongoing digitalization of the economy and the tokenization of assets, active discussions are taking place around central bank digital currencies, tokenized deposits, and stablecoins. We will actively participate in these discussions and will begin exploring the future vision of payment systems with a wide range of stakeholders, including considerations around new payment methods and cross-border payments. We will also work on improving the efficiency of taxes and utility bills payment.
The third pillar is the "maintenance and enhancement of a sound, resilient, and responsible financial system." Both globally and domestically, financial crimes are becoming more diverse and devious, heightening the societal demand for a robust financial system. Today, through the Cooperation agency for Anti-Money Laundering, we launched an AI-based scoring service to help combat money laundering. In August last year, we shared a collection of best practices with member banks on efforts to prevent money laundering through corporate accounts. We will continue to work toward establishing a framework for sharing information on fraudulent accounts to raise the overall standard of industry wide efforts. To address the growing incidence of special fraud, as well as investment scams via social media, romance scams and phishing scams, we will promote restrictions on ATM transactions for elderly customers align with the government's comprehensive countermeasures.
Last fiscal year, misconduct such as the safe deposit box incident at MUFG Bank damaged customer trust and confidence. I would like to offer my sincerest apologies to these events. We will work diligently at the individual bank level to prevent recurrences, and as Chairperson, I will lead industry-wide initiatives to share the lessons learned and raise the bar across the sector.
Other key initiatives include industry-wide measures to address customer harassment, discussions on international financial regulations such as Basel III, responses to cyber threats, and appropriate engagement on issues related to the privatization the postal services.
In conclusion, let me reiterate the thought behind our basic policy. As mentioned in the earlier section on the economic environment, the Japanese economy stands at a critical juncture to determine whether it can truly return to a path of autonomous and sustainable growth. The banking industry will support the current positive developments and contribute to the transition to a new growth model as a key player in money flow. While there is a slight increase in uncertainty globally, the importance of solving social issues such as GX remains unchanged. To build a better society and pass it on to future generations, the banking industry does not lose sight of what needs to be done and continue engaging in discussions.
We continue to move forward, believing that today is better than yesterday and tomorrow will be better than today, with hope for the future of Japan as a whole. I hope to make this year one that lays the foundation for such a vibrant future. I ask for your continued support.