Real Estate

New Mizuho chief pledges to save Japan from SME succession crisis


Mizuho Financial Group has a “big mission” to protect decades of accumulated Japanese technological know-how from demographic decline and a national business succession crisis, said the bank’s new chief executive. 

Tatsufumi Sakai, who assumed the top role at the megabank in April, said the effort would be directed, in part, at what he predicts will be a rising wave of domestic mergers and acquisitions and increased activity by private equity investors. 

Japan’s rapidly ageing demographic profile, he said, means the current population of 2.5m CEOs of small and medium-sized companies will be halved over the next 10 years as founders retire or die without a successor.

Many of these companies have developed technologies that help form the backbone of Japan’s manufacturing economy. 

“There is a strong sense of crisis that the technologies and manufacturing know-how that Japan accumulated during its high economic growth period after the war will not be inherited,” said Mr Sakai, who added that the business of guiding companies through succession crises was now among the bank’s top priorities.

Activities will include linking companies without a successor with private equity buyers and parachuting Mizuho bankers into CEO or CFO roles at small and medium-sized companies. 

Mr Sakai’s focus on the business opportunities arising from Japan’s succession crisis coincides with significant recent changes to the legal and tax framework of domestic mergers and acquisitions.

The changes, which came into effect in April should, in theory, make it easier and more attractive for listed Japanese companies to fund domestic M&A using stock rather than cash.

“I think there will be more in-in M&A deals [a Japanese group buys another Japanese group] between mid- and small-cap companies because of Japan’s demographic issues,” said Mr Sakai. 

On a similar theme, Mr Sakai said that greater productivity would be a key factor in Japan’s quest for sustainable growth as the nation grows older and the population shrinks.

Critical to that, he said, would be the creation of a cashless society. The current cost to Japan of storage and management of cash, he said, runs at around ¥8tn ($71.8bn) a year, but that could be halved by significant advances in electronic payment systems. 

Mr Sakai’s plans are part of his broader attempt to redress last year’s decline in full-year profits. In common with its two main rivals, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, Mizuho’s core domestic lending business has suffered the effects of Bank of Japan policy and ultra-low interest rates.

While all members of the financial-sector trio have tried to offset those effects — either by chasing higher-yielding assets or by acquiring new operations overseas — Mizuho has been relatively conservative in its approach. 

Mr Sakai, who is assembling Mizuho’s medium-term business plan, laid out in May his ambition to change the bank’s risk-averse culture and has since said he will improve, for example, its capacity to lend to non-investment grade companies overseas.

That effort has been underscored by Mr Sakai’s lukewarm view of the BoJ’s most recent policy tweak after its meeting on July 30-31.

Although the central bank made adjustments to increase liquidity in the moribund Japan government bond market, Mr Sakai said that it had produced only a “limited positive effect”.



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