JAPAN: Soaring levels of Japanese investment in Australia
Updated
Australia has become the second most popular place for Japanese investment in offshore funds. Both Japan and Australia have large numbers of retirement-age investors, known as "baby boomers" who are looking for the best returns. In recent years, Japan's baby boomer investments in Australia have grown ten-fold - to about $AU30 billion today. Now the Australian funds management industry is taking notice and wants to extend the relationship further.
Presenter: Karon Snowdon
Speakers: Richard Gilbert, head of Australia's Investment and Financial Services Association
SNOWDON: We've heard recently of the growing numbers of individual day traders in Japan who have discovered the quick returns possible from share and bond trading outside the country.
Japan's low interest rates means taking out a loan to buy higher yielding foreign securities is for the moment a good bet.
With less fanfare, Japan's private mutual funds have been quietly investing part of the country's huge pension savings in Australia, also attracted by relatively high interest rates and a strong stock market.
Richard Gilbert is the CEO of the Investment and Financial Services Association in Australia, he represents over 100 companies which manage about 700 billion US dollars in superannuation and insurance funds.
He recently met with industry representatives in Tokyo, and says the dramatic rise in Japanese interest not only confirms Australia's attractiveness as an investment destination, but indicates the changing nature of funds management in Japan.
GILBERT: Japan is rapidly internationalising itself. The financial services industry is doing that and I must say we were very pleased with the way we were received and the message we got from the Japanese financial services parliamentary secretary, Mr Tamura who has great plans for Japan as a global financial services centre.
SNOWDON: Free trade negotiations between the two countries are belatedly being seen as an opportunity by Australia's financial sector.
Despite being the much larger economy, Japan's share of mutual investment funds is much smaller than Australia's, thanks to compulsory superannuation Australia has the largest pool of investment fund assets in the Asia Pacific region.
But Japan's 130 million high income earners are among the best paid in the world.
Richard Gilbert hopes the two way trade in investments and financial planning and management expertise will increase as Japan's system undergoes further changes.
GILBERT: We believe we can do better, this was our first delegation to Japan and we're hoping that next year we can host a delegation from Japan to Australia.
SNOWDON: A lot of regulation change is necessary though isn't it, because Japan's regulation does make life difficult for foreign firms in the country?
GILBERT: Well I think they acknowledge that there might be too many barriers to entry, and our discussions with the regulators and government indicated an openness to work on these things.
SNOWDON: Are there any opportunities for Australian fund managers to take their expertise to Japan now and open up shop?
GILBERT: I think there are, there's a Japanese government pension fund, which has got a trillion dollars, which is looking for places to invest and I think there will be Australian based fund managers who will look for opportunities there. There are opportunities for retail investors and some of the best practice pension arrangements and financial planning arrangements that we have in this country they could be exported to Japan and used in the Japanese system as it becomes more global in its orientation and more sophisticated.
SNOWDON: It must be said I guess that Japan's pension system is in somewhat of a bit of a turmoil right now and certainly faces big changes in future. And also Japan is facing the possibility of a change of government fairly soon, so what would you say are the chances of reform in the next couple of years?
GILBERT: They'll need to work hard on these things, I mean I think the changes are going up because the opinion polls show that people in Japan are concerned about their entire incomes, and the people in the industry certainly want to come to Australia and see what we are doing here, because they see us as being successful.
