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Business

Tokyo's brokerage district looks to fintech for fresh start

With the stock dealers' association eyeing a move, Kabutocho ponders its future

Kabutocho, long known as Tokyo's brokerage district, has seen a growing exodus of financial industry players since the stock market bubble popped in the early 1990s.

TOKYO -- Tokyo's Kabutocho district, home to the Tokyo Stock Exchange and many brokerages, is trying to attract fintech companies and startups as it faces the prospect that the stock dealers association may leave the area.

The Japan Securities Dealers Association is considering moving out as early as next year. JSDA hopes to establish a committee made up of brokerage executives and others this month to discuss where to move and how to pay for it. Tokyo's Nihombashi and Hacchobori districts are cited as candidates.

Questions have been raised over whether the 51-year-old Tokyo Shoken Kaikan Building, where the JSDA has its office, offers sufficient earthquake resistance and security. Because the building houses systems handling reference prices for over-the-counter bond transactions, safety is a pressing issue.

At present, there are no buildings that meet the JSDA's requirements in Kabutocho or nearby Kayabacho. Heiwa Real Estate, which owns the TSE building in Kabutocho, is redeveloping part of the area, but the first building will not be complete until March 2021. The redevelopment is also behind schedule, prompting JSDA to consider relocating.

The cost of the move may be financed through the head-office relocation fund, previously the Securities Market Infrastructure Reinforcement Fund that was established in 2006. Brokerages contributed to the fund from profits they earned in connection with a trading blunder by Mizuho Securities during the market debut of what is then staffing company J-Com, now renamed as Like Co.

Fifty brokerages have contributed over 20 billion yen ($179 million) to the fund. More than 10 billion yen remains in the fund 10 years after its establishment.

There goes the neighborhood

If the JSDA moves, the stock exchange will be among the few financial industry players still in Kabutocho. The rise of online brokerages forced many smaller brokerages in the area out of business.

Among members of the association, only 13 brokerages, including Kyokuto Securities, are based in Kabutocho and Kayabacho, accounting for only about 7% of all members based in the Tokyo area.

Stock traders are taking the JSDA's relocation plan in stride. One executive with a second-tier company said many brokerages emerged after the consolidation of smaller shops in Kabutocho. The executive said he has a sentimental attachment to Kabutocho, but his company will not be going back even after redevelopment.

One executive with an online brokerage said that Kabutocho, as home to the TSE, will continue to have symbolic importance, but his company owes its existence to companies fleeing the district.

Efforts are being made to nurture new businesses in the area. Mitsubishi UFJ Financial Group established MUFG Digital Accelerator, an accelerator program for fintech startups, in Kabutocho. Young entrepreneurs can sometimes be seen working through the night in the office. The second phase of the program has ended and some startups are working on a project with a unit of Mitsubishi UFJ.

The Tokyo Metropolitan Government is trying to lure businesses, such as asset management companies, to Kabutocho and nearby areas under its Global Financial City initiative.

It was Eiichi Shibusawa, known as the father of capitalism in Japan, who helped turn Kabutocho into Japan's financial center. Its long decline began after the bubble economy burst in the early 1990s, and there are number of condominium complexes on the sites of former brokerages.

If redevelopment helps Kabutocho attract fintech companies and other startups, the whole financial industry could get a lift.

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