Toshihide Endo, Japan’s FSA chief, has been outraged by comments made by regional banks in Japan who have blamed low performing revenues in their lending sectors on the current monetary policy set by the Bank of Japan (BOJ)

The response from the FSA chief, who has played a major role in the regulation of cryptocurrencies in the country, was to publicly denounce Japan’s regional banks’ management teams saying, “they need to get their act together”.

Interest rates have been set at an all-time low of -0.1%, with the government maintaining its bond yield target at roughly 0%. As a result, more than 100 regional banks have seen their once profitable lending divisions struggle to make a positive impact on overall business revenue.

Another issue negatively affecting regional banks in Japan is the dwindling rural populations, as an increasing number of rural citizens relocate to Japan’s bustling megacities.

However, Endo is unsympathetic. He claims that the banks’ managerial teams are failing to take into consideration the fact that they need to create more sustainable business models.

The message from Endo in his statement does not seem unreasonable. If the Japanese regional banks diversify away from their current reliance on lending, in theory, their business operations should be able to counteract the negative impact of changing external influences such as government monetary policies.

He then pointed out that all regional banks need to take it upon themselves to act, instead of waiting for the FSA to announce policy changes; another rhetoric defending Japan’s monetary policy as Endo clearly refuses to allow the banks to use the BOJ’s decision making as a scapegoat.

Endo also added that some mergers between banks that have been aimed at creating a non-aggressive pact were pointless. They only serve to question how serious managers were about the current situation.

Regional Bank Profits Down 30% Over 5 Year Period

At the most recent fiscal year drew to a close, regional banks filed profits totaling 1.2 trillion Yen (US$11 billion) according to the FSA. This shows a 30% downfall in profits from figures submitted in March 2013, which was prior to the central bank’s decision to exercise its aggressive monetary easing policy.

Since then, the regional banks have been using the monetary policy as an excuse for their bad performance rather than looking for alternative options to make up for the shortfalls in lending profits. It also seems the banks are guilty of waiting out the government’s decision to aggressively decrease interest rates; a tactical error the banks have come to regret.

Now it seems the banks have resorted to lobbying in an attempt to apply enough pressure on the BOJ to restore interest rates so lending can resume to its pre-2013 state. The tactics have backfired as Endo is having none of it. All the commotion made by the banks has only served to infuriate the FSA official into publicly speaking his mind.

Endo’s Tough But Favorable Approach on Cryptocurrency Regs

On a positive note, Endo has played a firm role in the ‘official‘ introduction of the blockchain into the Japanese economy.

In 2015, he was given the responsibility of overseeing Japan’s financial institutions at the FSA, which now includes the cryptocurrency exchanges. It meant that Japan would become the first country to regulate cryptocurrency under its financial laws. To date, the aim of these regulations has been to protect Japanese consumers using crypto exchanges.

Furthermore, the FSA wants to ensure that it does not discourage the potential technological innovation the blockchain technologies bring to the country.

Even after the $530 million theft from Tokyo’s Coincheck Inc in January 2018, the FSA was not dissuaded from continuing to allow the Japanese public to trade and invest in the blockchain.

Rather than an outright ban on cryptocurrency exchanges, tighter regulations were applied. This was after FSA inspections revealed that it was those in charge of the exchanges that were at fault. The management teams were found guilty of having poor internal procedures with no basic measures in place to protect its users or prevent money laundering. Had the correct processes been put in place, the $530 million heist could have been avoided – an expensive mistake.

The FSA quickly learned from Coincheck’s faults and swiftly ordered several exchanges to cease operations until further notice.

Adapt and Diversify or Face the Consequences

Endo’s intolerance of Japan’s regional banks’ whining may seem unreasonable or make perfect sense, depending on which side you are on.

He has been part of Japan’s finance ministry since 1982. He has years of experience and had plenty of time to understand the challenges both government and businesses can face in times of economic hardship.

When the heist of $530 million in NEM took place, the FSA chief could very well have denounced the blockchain. It would have meant the closure of all Japanese based cryptocurrency exchanges and would have sent blockchain-based assets underground.

Instead of taking the easy route and shutting down the propagation of blockchain technologies, he took some of his own advice. The very same advice that he recently dished out to the country’s regional banks – he adapted to the new challenges presented to him. The solution from the FSA and Endo was to keep the blockchain alive by introducing tighter regulations to protect consumers.

Weighing up both side’s arguments, the message Endo has put across to the Japanese banks seems to make the most sense. If the banks want to continue making a profit, the management teams need to learn to adapt to the current situation, which means considering the diversification of their current business models to become less reliant on a single source of income.

My name is James Donaghue. I am an SEO freelance consultant and investor in blockchain technologies. I am a proud father, my hobbies include football (soccer), tennis, swimming, and cycling, and I also love travelling. Another hobby of mine is staying up to date with the financial markets - I used to work within the financial sector as an IT engineer setting up Reuters and Bloomberg market data feeds. During that time I learned a lot about the financial industry and came across the blockchain in its early conception. It wasn't until around 2015 I really started to take a keen interest in its development. Since then I have been studying the progress of the blockchain and investing in cryptocurrencies. I now contribute news, data, and reviews about ICOs, blockchain solutions, and cryptocurrencies regularly. I truly believe that disruptive blockchain tech will be an integral part of all of our futures. As such, I plan to continue following trends, breaking news, and the future development of blockchain solutions across all industries.


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