Case - Retail Banking in Japan: The New Strategic Focus

Case summary With declining credit off take and profits from their traditional corporate banking operations, Japanese domestic banks shifted their strategic focus towards amore retail approach. Japanese banking officials and experts claimed that this change would be beneficial for the Japanese banks. However, critics were apprehensive about the advantages of the new approach.

Background of Japan Banking. In this case Japanese banks were in corporate banking in which they deal mostly to the corporate industries by providing long term capital lending. As 1950s Zaibatsu affiliated banks started acting as main banks for the companies, which were created out of the pre-war Zaibatsu which resulted in a complex web of cross-ownerships between banks and the big corporate houses due to special relationship between corporate and banks. With the Bubble economy Japanese banks faced huge non performing loans, but still bank continued to advance the loans to their borrowers, especially to sectors such as real estate and construction. As a result of crisis by 199798 as the banks were saddled with huge NPL. The crisis forced the Japanese Government to take measures for restructuring the banking industry like temporary nationalization and subsequent sales of non-viable banks, re-capitalization of weak banks, tighter bank regulation and supervision, and new institutions for bank restructuring.

Future as a fruit for tomorrow. Japanese Banks started retail banking at their primary focus, the banks were forced to look at new customer segments and develop new business models for shoring up their bottom lines. By 2001, Japanese bank seems to be focused to Retail banking by starting banks. Opportunities. As per IMF there is a vast opportunity in Japan for Japanese as Citi bank only carries the retail operation so competition will must help to customer get better services . Banks are increasingly focusing on efforts to improve profitability, and most look to retail banking, including small and medium-sized enterprises and mortgage loans, for attractive opportunities The Japanese government was also in favor of the banks push for more retail business and initiated several steps in encouraging Japanese banks to develop a more focused retail approach.

Japanese customers are not happy with the existing banking facilities so new system will get them lot of deposits to them.

Challenges Heavy Investments are needed to be made by the Japanese banks for a serious commitment to retail banking operations. There is problem with implementation too as lack of Retail banking experience Its really difficult to find new customers for their retail banking. There is competition with developed players of Retail banking. Due to high retail banking charges it will to difficult gain customers even for ATMs.

Opinion As per my view the retail banking is great step by Japanese banking as going far through loss in corporate they must prefer where is enough scope of profit. As Opportunities seems much more fruitful if strategies applied than it may become success for them. Challenges also a point but every business is with high challenges, thing is that how they plan and implement. As Scope seems much profitable and favorable, so I must be in favour of Japanese should go for retail banking.