TOKYO -- Ryozo Himino is set to take the initiative in updating the administration and regulation of Japanese finance in line with global trends as new chief of the Financial Services Agency.
Himino was promoted on Monday to be commissioner of the FSA, moving up from the post of vice minister for international affairs. He succeeds Toshihide Endo.
It marks the fourth time for Himino to have succeeded Endo in the same positions since they joined the old Ministry of Finance in 1982 and 1983, respectively. A major reform in 2001 saw the creation of the FSA, the responsibilities of which used to be handled by the ministry, which still goes by the same name in English even though its Japanese moniker changed.
Given their common roots, Himino's ascent has raised the question of what Endo expects from his successor, who has honed his skills in the global arena.
After receiving his MBA from Harvard Business School, Himino returned to Japan in the summer of 1987 and was assigned to the office of the deputy vice minister for financial affairs at the old finance ministry. Endo, who was then a section chief in the office, immediately took a shine to Himino for his quiet and friendly demeanor, recognizing the younger bureaucrat's sharpness.
The two worked for Toyoo Gyohten, seen as a major member of the "Currency Mafia," the key ministry officials tasked with shepherding the yen.
Assigned to the post of assistant to the chief of the banking division at the old ministry three years later, Endo attended various international meetings, including those of the Basel Committee on Banking Supervision, the Swiss-based forum for crafting international rules for financial institutions.
Endo once told Himino, who was then in a separate division, of his experiences at international conferences. "Basel is interesting," Endo said, intriguing Himino and prompting him to pursue his own career in the field of international financial affairs.
After heading the Supervision Bureau at the FSA, Endo became commissioner of the financial industry watchdog in 2018. During his two-year tenure, Endo did his utmost to change the FSA's organizational culture known for a condescending stance in regard to financial institutions, instead placing emphasis on dialogues to draw out their real opinions.
"Financial institutions began to gradually change their attitude toward us," Endo recalled. But the internationalization of Japan's financial administration remains a major challenge for the FSA.
As its name indicates, the International Affairs Office is tasked with handling international affairs at the FSA. Its staff compile opinions from the Supervision Bureau and other parts of the agency on various themes and represent Japan at international conferences of financial regulators from major countries.
As regulatory and supervisory officials from foreign countries often attend such conferences, Endo believed that the Japanese system was not designed to "proactively lead deliberations" there.
With the maturation of financial markets in Japan, major Japanese financial institutions are starting to aggressively go abroad to compete with foreign rivals. Deliberations on Basel II, a voluntary global regulatory framework for bank capital adequacy, and other regulations are aimed at preventing financial crises by enhancing the financial health of major financial institutions.
Japan raised a question about the fundamental concept of such regulations. About four years ago, Nobuchika Mori, then commissioner of the FSA, said, "Regulations should be designed to contribute to not only financial stability but also economic growth." Behind the message was Himino, then responsible for international affairs at the agency, who thought that the flexible application of rules, rather than the all-out toughening of them, was necessary to help businesses.
An executive of a major life insurance company voiced the hope that Himino helming the FSA will "give a supportive push to our efforts to develop businesses overseas."
Himino has been leading the FSA's efforts to express Japan's views to the international financial community. Stressing that the country should chair as many international conferences as possible, Himino has held various senior international positions, including as secretary-general of the Basel committee.
Ample international experiences have instilled in him a strong sense of crisis that "Japan must reinforce its presence in the world more strongly."
The FSA has won chairmanships or vice chairmanships at 70 global bodies, including the International Organization of Securities Commissions. In 2019, Himino became the first Japanese chairman of the Financial Stability Board's Standing Committee on Supervisory and Regulatory Cooperation, consisting of financial regulators from major economies and international organizations, and led deliberations on international regulations.
American social media conglomerate Facebook announced its digital currency Libra plan last year. The People's Bank of China, China's central bank, has begun testing a digital renminbi, while the Japanese government and the Bank of Japan are set to launch earnest studies on a digital yen.
With public and private efforts to achieve innovations in blockchain technology gathering steam, Himino told the FSB that financial regulators around the world should work out strategies to address the accelerating trend. At stake is a theme to achieve economic growth and financial system stability at the same time through nurturing new services.
Endo expects the Himino-led FSA to complete the internationalization of Japan's financial administration.
Tokio Morita, vice minister for international affairs, who joined the old finance ministry in 1987, serves as a bridge between domestic and overseas financial administration. His ample work on overseas issues includes two assignments at the International Monetary Fund and experience dealing with the 2008 global financial crisis, which are key assets for him. As head of the securities division, he worked tirelessly to prevent the collapse of Lehman Brothers from affecting domestic investors.
To make Japan's views heard more widely abroad, the level of domestic supervision needs to be raised. Now, with the global economy battered by the coronavirus pandemic, the biggest theme for countries is how to maintain financial system stability.
Teruhisa Kurita, director-general of the Supervision Bureau, who joined the old finance ministry in 1987, is marking the third year in his current post responsible for overseeing regional banks. In the past two years, Kurita imposed tough administrative punishments on Suruga Bank for a scandal involving investment properties and Japan Post Insurance for undue sales of polices that became a contentious social issue.
For key positions supervising regional financial institutions, Himino has assigned seasoned regulators trusted by regional bank operators and others concerned.
For example, Shinya Ishida, who joined the old finance ministry in 1990 and headed its first and second banking divisions, has been retained as the deputy director-general of the Supervision Bureau. That may be taken as defensive but reflects Himino's intention to promote dialogue with regional financial institutions. "Without earnest talks with managers (of financial institutions), it is impossible to foresee a real crisis," Endo said based on his experience of watching major banks tumble one after another following the collapse of Japan's asset-inflated bubble economy of the late 1980s.
He began preparations last year to appoint Himino as his successor, such as bringing him to informal meetings with regional banks. He has also released a carrot-and-stick reform package for regional banks while revising an "early warning system" so as to focus supervision on financially weakened banks and issue guidance to them before their fall into a dangerous situation.
Endo has also created an environment to facilitate reform of regional banks, such as the preparation of a special law and deregulation to exempt the application of the anti-monopoly law to mergers between regional banks. Further, in June he revised a law to smooth the injection of public funds into regional banks and others.
As Himino is expected to follow Endo's reform policy, regional bank officials are paying attention to how the new FSA chief will steer the agency based on his experience as the head of international affairs.
Another key issue is how the FSA will handle trends in financial technology combining financial services and information technology. As director-general of the Strategy Development and Management Bureau, Junichi Nakajima, who joined the old finance ministry in 1985, will lead the task. Having studied mathematical engineering at the School of Engineering at the University of Tokyo, Nakajima is a digital expert capable of programming and engaging in detailed conversations with startup founders in their "common language."
Nakajima will cultivate new services through the use of financial institution data, among others.
Tomoyuki Furusawa, director-general of the Policy and Markets Bureau, who joined the old finance ministry in 1986, is taking charge of deregulation, corporate governance reform and other issues. As head of the corporate disclosure division, he was involved in revising the corporate governance code for listed companies.
With investment based on environmental, social and governance, or ESG, factors drawing attention in recent years, Furusawa will be tested for whether he can create an environment for enhancing corporate value and benefiting investors.
Shunsuke Shirakawa, who joined the old ministry in 1986, has retained the post as vice commissioner for strategy development and management. Having represented Japan at the Basel committee for eight years, Shirakawa, who calls himself "a direct disciple of Himino," is seen as the best partner and supporter for the new FSA chief.
As head of the insurance division, Shirakawa visited areas devasted by the 2011 earthquake and tsunami in northeastern Japan and worked to ensure smooth insurance payouts.
Motonobu Matsuo, director-general of the Securities and Exchange Surveillance Commission, who joined the old ministry in 1987, has led the FSA's digital strategy. Now that IT-based high-speed financial trading is spreading in Japan due to the increased presence of foreign investors, he is responsible for protecting investors from changes in market environments.
The FSA under Himino's leadership is already facing a crucial stage, having set sail amid global economic turmoil caused by the COVID-19 pandemic.