No unfriendly M&A please, we’re Japanese
THERE IS A discernible spring in the well-heeled steps of Tokyo’s banking community and the bars and restaurants around Otemachi and Roppongi Hills are full. After more than a decade in the economic wilderness, corporate Japan is expanding again and in need of investment banking services.
In most developed banking markets that might spell the start of investment banking good times. Japan, though, is different. Despite a vast economy and savings, markets lag their western counterparts in sophistication and development. So although business will likely be brisk in 2007, a windfall is still some way off for Japan’s bankers.
“When I arrived in Tokyo in 2004, the market was starting to pick up,” says Daniel Dees, managing director, financing group at Goldman Sachs. “We have seen healthy growth since then but the pace of change lags that of other markets.”
While international markets continue to innovate and develop new products and create new markets, Japan’s capital markets, though vast, are markedly unsophisticated. The domestic debt markets remain almost exclusively fixed on investment-grade debt; there is no high-yield bond market to speak of. The equities market is dominated by the issue of common stock, and convertible bonds and warrants when conditions dictate.