Jan. 04, 2019

Koji Fujiwara, Chairman
Japanese Bankers Association

New Year’s Message

As we celebrate the start of 2019, I would like to share my thoughts on the year to come.

I believe we can summarize 2018 as a milestone year where the economy shifted from a Goldilocks economy to a variable economy. While the global economy generally continued to grow steadily driven by the U.S., the Japanese economy also continued on a moderate recovery trend. However, push back against globalism is emerging as a cause of concern, as evidenced in U.S.-China trade frictions, Brexit, and the rise of populism in the U.S. and Europe. These are not merely trade issues, but could be interpreted as issues associated with income inequality and poverty, environmental issues, and a battle for hegemony of digital technology in the future. Japan is also facing emerging social issues, including structural problems (e.g. declining birthrate, aging population, and population decline) and irreversible changes in society due to digitization.

Under these circumstances, the expected roles of the financial sector are expanding and diversifying. The JBA committed to make 2018 a turning point in our efforts to address social challenges, and we have been engaging in activities focused on solving the challenges faced by customers and business partners. Nine months have passed since I assumed the chairmanship last April, but this trend surrounding finance has not changed. Banks are now expected to be more creative and innovative, playing a role in the design of next-generation social infrastructure.

2019 will be an important year for the banking sector in terms of proceeding with full-fledged digital innovation. This transformation will call on the management of banks to not only change their business model but also to change their mindset, namely their philosophy. The financial services of the future will not be an extension of current practices. It is therefore necessary to take a backcasting approach, defining the ideal future for finance based on the three perspectives stated below and thinking outside the box when considering how the world may change and how customer needs may change.

From a functional perspective, banks need to act as information intermediaries. In addition to our traditional financial intermediation function, there is increasing demand for banks to provide non-traditional information intermediation functions. Specifically, we are expected to address the challenges faced by both customers and society as whole by using data, which is regarded as the “oil of the 21st century”.

From a strategic perspective, I think that “strategic collaboration” will become a keyword. Traditionally, many of banks’ strategies have been developed in a self-contained manner.  However, in order to create new value in this era of rapid change, it is necessary to have partners and incorporate ideas from both inside and outside the organization.

From a workforce perspective, it is important for banks to better utilize diverse talent and foster a culture that encourages taking on new challenges. In that sense, the “work style reform” currently being championed in Japan is necessary, but not sufficient. To fully achieve this goal, we must create a more attractive workplace within the banking sector. I believe that, in the digital era, it is more important than ever to foster a corporate culture that encourages employees to take on new challenges and derive fulfillment in contributing to their customers and society.

What is common in all of these three perspectives is that banks will need to serve as a “hub” within society more than ever. Through our financial intermediation function, banks have traditionally functioned as a hub in terms of linking entities with surplus funds and those that need funds. In the coming era, we have the potential to act as a hub that connects more diverse players by embracing the concept of design thinking. In other words, going forward, there are infinite possibilities for banks. Looking outside of Japan, fragmentation tends to be emerging due to protectionism, nationalism, income inequality and poverty. Now is the time for banks to work to serve as a hub within society and take the initiative to champion a renewed push for globalization and realize coexistence and mutual prosperity. At the core of the concept of customer-oriented business conduct is the desire to make an effort for the benefit of others, and I believe this is banks’ mission rooted in our ethics and integrity.

Even amid an era of rapid change, the connections between people and trust between organizations remain unchanged. Banks need to become the best financial solutions partner for our customers and society. First and foremost we want our corporate clients to see us as someone who helps them to devise business plans and for our individual customers to see us as someone who helps them devise life plans, rather than seeing us as simply financial institutions. To achieve this, we will not only need to respond to change but also be determined and prepared to be change leaders and continue to boldly take on challenges going forward.

Last but not least, I hope that 2019 will be a year of significant progress for all of you.