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Revitalizing the regions

Interview - June 9, 2017

Takashi Tsuchiya, of regional-based Ogaki Kyoritsu Bank (OKB) speaks about Abenomics impact on the banking sector and OKB’s contribution to regional revitalization


How is Abenomics boosting growth in terms of regional banking?

Abenomics has been emphasizing the revitalization of the regional areas, but the importance lies within how much revitalization will in fact be accomplished. All regions in Japan, not only ours, are welcoming the reforms and looking forward to the results. One of the main challenges in the regional areas, which is also affecting the 64 regional banks, is the current demographic situation of a decreasing and aging population. We hope the next steps of Abenomics will address the challenges and we are curious to see how it will affect the regional areas and to what extent.

For instance, in terms of the decreasing population in the regional areas, it is crucial to establish a good foundation of infrastructure from the bigger cities to increase incoming people. It is also important to establish new businesses in the regions as well as strengthening the already existing ones. For us, I am very glad that the effect of Abenomics is spotlighting the regional areas because it has a positive impact on OKB as a bank.


There has been a major restructuring of Japanese regional banking. One of the key aspects to achieve sustainable development will be to boost growth in the local Japanese regions. How can the competitiveness of regional banks be increased?

For example, the main street in our town is called “OKB street”, and on this street, there used to be around 100 shops. This amount has now decreased to approximately 70 shops. To revitalize the shopping district, we invested in the company in charge of this area. We started contributing in several different ways, such as naming the street after our bank; developing our own stores; raising statues and opening the OKB workshop where we established an office for mentally challenged employees, and this is how we got a lot of attention from the outside. Initially, many people were opposed to our initiatives, but after a while they started seeing the positive effects it had on the revitalization of the area. When we recently celebrated our 120th anniversary, there were celebrations in the streets and all over town, and we received a lot of congratulations and well-wishes from the locals.


In terms of your mid-term management plan, how important is it for you to have this philosophy of being committed to pioneering new ideas and movements?

Our business strategy is, “Very OKB”, which means very good. This strategy was established with the enactment of our three-year mid-term management plan.  What inspired me to create this motto was a road sign I saw during a trip to Taiwan, saying “Very Taiwan”, which made a strong impact on me. For our company to be “Very OKB”, we have constructed five fundamental strategies. The first one is “Very powerful”, which demonstrates stronger earning power and growth potential; the second is “Very comfortable”, which represents a higher level of service. “Very reliable”, our third pillar, means getting the trust and confidence from the people in the region as well as contributing to the regional development through voluntary work for example. Our fourth pillar, “Very flexible”, refers to the constant exchange between our employees and our internal ability to move with the changes; and our fifth pillar, “Very solid and efficient” means the ability to keep on doing what we have done through a sustainable core.


One thing OKB has been very good at is indeed diversification; not only being tied to conventional banking, but finding ways to expand through different sectors, business units and subsidiaries. Where does this flexible and, perhaps, not-so-Japanese point of view come from?

As I mentioned, the demographic issue will become even more serious over the next 10 to 20 years, and an important side effect of this is of course that businesses will decrease in alignment with the decrease of the population. Thus, the economy itself will shrink. That is why OKB as a business needs to consider our survival strategy, and we have identified that one key solution is to establish a solid OKB brand in the region. As well, we do not believe operating in many areas will solve the issue; however, operating in the best, or most relevant areas is crucial. Only having an operation tied to banking is a waste. Thinking outside the box – why cannot banks sell vegetables? Why cannot banks do laundry? Indeed, there are restricting regulations, but playing with the thought and breaking rules and stereotypes is important for business development. For instance, if an elderly person visits the bank for an economic matter, imagine if they could also have their shopping or cleaning done in the same place – it would be very convenient for the customer.


Prime Minister Abe has stressed the need for a change in the Japanese mind set – there is a need for openness; there is a need to globalize, and there is a need to understand how Japan can increase its competitiveness and add value. How are you aiming to transmit this change and add value to the Gifu region?

For each one of our branches, we take time to consider how to add value to the life of the people living in that area. For instance, we allow our employees to participate in the prefecture assemblies and do our best to participate in events and activities taking place in each area to get a deeper understanding of the region and a stronger engagement with our customers.

To add value, we have a mobile vehicle moving around the Takayama area stopping in different cities or towns on certain days offering ATM and consulting services. We specifically offer this service in very rural areas that normally do not have access to basic financial services.

We also offer a specific rescue service for damaged areas. For instance, after an earthquake or other natural disaster takes place, the ATM services may be struck out, and in those cases, we have a disaster recovery support vehicle available to mobilize anywhere in Japan to offer these services until the regular systems are back on track. When the Tohoku earthquake struck in 2011, we immediately planned our disaster recovery support vehicle in the region to support the locals. At that time, many people lost their cash cards in the earthquake and its aftermaths so even for the ATMs that did work, people could not utilize them. To facilitate these kinds of issues, OKB established a collaboration with Fujitsu, and after a year of research we jointly developed the biometric ATMs that allow customers to carry out transactions with just a scan of their palm. This system was established as the second in the world after Turkey.


Internationally, OKB has been active in supporting its customers when going overseas, both in Asia and North and Central America. Could you take us through your strategy in terms of following your customers abroad and providing your services to them overseas?

In terms of our international business, we used to have branches in New York, Hong Kong and a subsidiary in Brussels, but after the 9/11 terrorist attack, we made the decision to close the financial subsidiary in Brussels and turn the branches in New York and Hong Kong into representative offices due to the economic situation. Hong Kong later became the gateway to China which contributed greatly. Back then, most major companies were already globalized. Although there were not many medium and small–sized companies that went international at that time, there were relative amount of medium and small-sized companies who expanded to Hong Kong.

Since these companies wanted to enter China with Hong Kong as a stepping stone, we set up a representative office in Shanghai to support the move. There were a lot of customers wanting an introduction for lawyers and to acquire land, so we operated as the facilitator for doing so. Once our support activities were running in China, we also established representative offices in Bangkok and Hoh Chi Min.

Since SMEs saw foreign expansion as an increase of profit, they wanted to go to areas where Japanese companies had already expanded so they could collaborate. When an SME want to establish a facility in a local region, they seek investment. To meet their demands, we do not just hand out loans; we collaborate with the local bigger banks, such as the Bangkok Bank to get them to invest in these companies.


Are there any plans to partner or make agreements with American banks to support your customers wanting to discover American business opportunities?

Currently, we do not have any direct partnerships with American entities, however, if there is a demand from local companies operating in the US, we might consider that opportunity. We do already support some Japanese companies in the US from a distance.


There are efforts from the government to attract investment and incentivize international companies setting up in the regions around Japan. Why should companies consider a regional area such as Gifu, and not the big cities when setting up their operations in Japan?

Gifu has a preferable location at the geographical centre of Japan, which is something we are very proud of. Gifu is also known as the “manufacturing Mekka” of Japan; we have an abundant water resource and the transportation services are very well developed. This region has a lot to offer to foreign (and local) companies.


2016 marked your 120th anniversary, and although Japanese companies are renowned What are your long-term expectations for the future?

After 100 years, I want people to say “I did not know OKB was a bank”.