Established in 2002 through the merger of three major banks, Mizuho Bank has a long history dating back to the birth of Japanese capitalism in the Meiji era. Today, Mizuho combines expertise in all areas of financial services and has a well-developed domestic and global network advising both Japanese and international clients. At the heart of all its services is the commitment to meet the diverse needs of its clients by understanding their business and plans for future development. We talked to Motoo Matsumoto, Head of Germany, Managing Director of Mizuho Bank in Frankfurt, about the origins of the bank, Japanese business in Germany, and barriers to foreign investment in Japan.
J-BIG: Mizuho Bank originated from the merger of several important Japanese banks. Which banks were involved and how did the merger come about?
Motoo Matsumoto: We emerged from three legacy banks: Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan. Dai-Ichi Kangyo Bank is the oldest bank in Japan, founded by Eiichi Shibusawa, who is also known as the father of Japanese capitalism. He introduced Western capitalism to Japan after the Meiji Restoration and established many economic innovations, including the stock exchange. He was an essential figure for Japan’s economic development of that time. Fuji Bank, founded by Zenjirō Yasuda, has a lot of expertise in public finance and the management of public money. The Industrial Bank of Japan was established as a public sector bank that not only offered long-term funding but also securities and trust banking services. It played a major role in driving forward the industrialisation of Japan after World War II by offering long-term funds for Japan’s core industries. With the merger in 2002, we inherited the corporate DNA of all of these banks.
There were several reasons for the merger. One was the collapse of the Japanese bubble economy in the early 1990s, another the financial market reform called “Financial Big Bang” in 1996. The Japanese government tried to liberalise the market with the aim of making the Japanese financial market more “free, fair and global”, spurring competition and resulting in a more competitive financial sector. The Big Bang brought about a massive consolidation of Japan’s banking sector through which financial conglomerates emerged to cover a broad range of services in the financial space. Ahead of everyone else, we three banks decided to become one big bank and created Mizuho Holdings in 2000, with the objective of supporting our clients with a wide range of products from retail to corporate and investment banking.
J-BIG: What services and expertise came together when the three banks merged?
Motoo Matsumoto: Each bank had their own fields of expertise. Dai-Ichi Kangyo Bank and Fuji Bank had very good reputations in the retail as well as the corporate space – with a lot of branches in and outside of Japan. Especially Dai-ichi Kangyo Bank had a broad presence in Japan. Mizuho has inherited its network and today we are the only bank that has a branch in every prefecture of Japan. Fuji Bank in addition had a good relationship with the public sector, especially with metropolitan municipalities. The Industrial Bank of Japan was specialised in long-term funding for large corporate clients. These fields of expertise and an already-good client base came together with the aim to offer a wider range of products and the best services for our clients. The goal of the merger was to contribute to economic development and prosperity on a global level as well as to become one of the best banks in the world.
J-BIG: How big was the bank at the time of the merger? And how has the bank developed from then on, in Japan and internationally?
Motoo Matsumoto: At the time of the merger, Mizuho had about 33,000 employees. Generally speaking, a merger leads to an immediate consolidation and downsizing. In our case, however, it was not so drastic but more of a gradual integration, which is very typical of Japan. Of course, there was the need to integrate different branches into one. However, we were not cutting or throwing out anything substantial, rather the goal was to streamline and invest in the future.
Needless to say, there have been challenging times. But, since the merger, we have been able to develop our business in Japan and in the international market. As a Japanese bank, we work very closely with Japanese clients as one of the core parts of our business. At the same time, as an international bank, we have been working very closely with non-Japanese clients as well. We were able to overcome various financial crisis, like the collapse of the Lehman Brothers in 2008, and always returned to the global space to serve our clients.
J-BIG: How big is the company today?
Motoo Matsumoto: Today, Mizuho Bank has 25,897 employees globally. We have 751 branches in Japan and 111 offices in 37 countries overseas. In the EMEA region, Mizuho Bank is represented by 25 offices. We serve approximately 23 million retail banking customers in Japan. As for corporate clients, we serve about 70 percent of listed Japanese companies. Globally, as well, we cover 80 percent of the international companies in the Forbes Global 200.
J-BIG: Could you explain what you, as a Japanese bank, typically do for a Japanese client?
Motoo Matsumoto: To offer the best financial products and services, we first must understand the needs of our clients. When you start any business, money obviously plays a huge role. We can offer loans for capital investment, but beyond that, we want to accompany our clients as a partner on their journey to create something new. We search for the best solutions, so that they can produce something that can help change our life and the world. When a customer expands their business outside of Japan, our offices in the respective country can support them. For export business, when the company receives US Dollar or Euro but needs Japanese Yen to pay their employees in Japan, we exchange the currency for them. As clients continue to grow their business and plan to raise financing through the public capital markets, our security departments stand ready to facilitate this, along with our financial expertise and investor base. We always place the interest of our clients at the core of our business.
J-BIG: That means your service is a mixture of financial transaction services and advisory support?
Motoo Matsumoto: We believe that right and proper understanding of our clients’ needs is our basis for all financial services. One of our core values is “Client First”. Let me give you an example: In sales, clients are often shown catalogues to help them decide on a product. We have a different approach. First, we try to understand what exactly the client’s goal is, and in the next step, we decide what we can contribute from a financial angle. This is our philosophy. Finance is our toolbox. It is important to understand how to utilise and combine these tools effectively for our clients by communicating closely enough with them.
J-BIG: How do you support the German subsidiaries of Japanese companies?
Motoo Matsumoto: The process is essentially the same. However, we not only work with the local subsidiaries, but also with our clients’ headquarters to understand their strategies. If we understand their business and their plans for future development, we can support the local offices accordingly. So we are not just looking at one specific local client and one specific local transaction here in Germany, but always take a broad view of their global business and their position in Europe to provide our local service as fittingly as possible. The product may be simple: loans, deposits, foreign exchange, etc. However, every financial transaction should make sense in the broader context of their business strategy.
J-BIG: What is your personal history at Mizuho Bank and how has your career developed?
Motoo Matsumoto: I joined the Industrial Bank of Japan, one of the legacy banks, in 1992. In my student days, I had developed an interest in the European Community, the origins of the EU, and hoped to work abroad, especially in Europe. For the first half of my career in the bank, I worked in Tokyo. In 2002, I had my first opportunity to work outside Japan; that was in Copenhagen, Denmark. Then, I also worked in Moscow for the Russian market, in London for EMEA-wide business, and in Vienna for the Central & Eastern European countries. And now I am in Germany.
J-BIG: Did Mizuho come to Germany after the merger or did the three legacy banks already have branches here?
Motoo Matsumoto: We already had some offices in Germany since the 1960s. The Industrial Bank of Japan, which, as I said, was more capital market oriented, came to Frankfurt, while the other two were mainly covering Japanese companies in Duesseldorf. After the merger, we consolidated our business in Germany. Today, our offices are still located in Frankfurt and Duesseldorf.
J-BIG: What does your daily work as a German branch with the Japanese headquarters look like, and who has which role in this constellation?
Motoo Matsumoto: We work closely together and communicate on a daily basis. The headquarters needs to understand what is happening globally so that our corporate strategy can be adjusted accordingly and so we can be a good advisor and partner to our clients in Japan and Germany. In order to support our clients globally, it is key to understand our clients in both countries, both for our business and to deliver value.
Through Covid, there have been many changes in our cooperation with the headquarters in Japan. Communication has become even closer and there are more spontaneous calls and online meetings. Even in a cross-border space, we serve our clients as one Mizuho team.
J-BIG: What is the situation of Mizuho’s German business today in terms of employees and clients?
Motoo Matsumoto: We have about 100 employees, 30 here in Frankfurt and about 70 in Duesseldorf. Our corporate functions are mainly located in Duesseldorf, so you could say that Duesseldorf is the parent branch and Frankfurt is the sub-branch – but in principle, they fulfill the same function. We also have a sister company, Mizuho Securities Europe, in Frankfurt, with 40 to 50 people, which makes a total of 150 employees in Germany. We are growing steadily – especially with the increase in our business with German and European clients. In the last ten years, we have doubled our business. In the EMEA region, we are the second largest country of operations after the UK. Here in Germany, we focus on B2B, so we only serve corporate clients.
J-BIG: What are the topics the headquarters are most interested in regarding the development in Germany?
Motoo Matsumoto: They are really interested in the changes and trends of Germany’s signature industries, such as the automotive industry. Since there are many energy-related issues car manufacturers are affected by, such as ESG, green energy and hydrogen, the headquarters also keep their eyes on other industrial manufacturers that offer solutions in this area. These hot topics are covered not only from a German perspective but also from a European one.
J-BIG: As a bank, you support many Japanese companies in Germany and have an insight into their financial performance, their investment strategies and the overall market situation. From a banking perspective, how would you describe the current state of Japanese companies in Germany and where they are headed?
Motoo Matsumoto: Germany is a mature and established market, while Eastern Europe is a growing market. Since the labour costs are different, the investment for new production facilities happens mainly in the eastern countries like Poland, Hungary and the Czech Republic. Capital investments like mergers and acquisitions or Joint Ventures tend to take place in developed countries such as Germany.
The EU is one of the leading areas for ESG, which stands for “Environment, Social and Governance” – a set of standards measuring how an organisation manages risks and opportunities related to environmental, social, and governance criteria – and Germany is one of the leading countries. This fact is getting more and more attention from clients. It is important for Japanese companies to understand and catch up with the trends in Europe where many de-facto standards have been created. The changes in Europe are relatively fast with strong commitments. In the Japanese mentality, companies tend to consider the changes carefully and therefore do not adapt so quickly. The branches and subsidiaries in Germany play an important role in capturing and reporting the “outside reality” back to the headquarters and mobilising them towards green or sustainability related issues.
But it’s not just the exchange of information that Japanese companies are looking for in Germany. The actual steps towards these trends are also being taken here. There are projects with German and European companies for new production methods and energy conversion, such as hydrogen. These steps towards more sustainability are happening continually. Due to the pandemic, the supply chain problems and the situation in Ukraine, however, several business plans slowed down. Ukraine used to be a large provider of labour and some key products and components, for example, but currently this is not possible. Many of our clients are really affected by these situations and we are supporting them through the crisis.
J-BIG: In terms of investment strategy, what is the general tendency of Japanese companies in Europe?
Motoo Matsumoto: The relationship between German and Japanese companies can have many dimensions: They can be competitors, partners, buyers and suppliers, or even investment partners within the same companies. Even though they compete on the business side, our societies share similar social issues, such as energy security or an aging society. I think there is more room for cooperation on these long-term issues. Because of the troubles in geo-politics, we need stronger ties, and together, we will be able to achieve better results – not only on a purely business basis, but also with the help of governments. This shift towards a more long-term perspective could also be seen in the investment strategy of Japanese companies in Europe.
J-BIG: What reasons do German companies have to work with you?
Motoo Matsumoto: Since there are already many big banks in Germany and Europe, it is important to distinguish ourselves and to support German companies with our expertise, such as the Asian market. We offer consultation on how their business can be supported not only in Japan but also in other parts of Asia. We cover Asia widely and deeply from Japan, China, and South Korea to India. Since we have already served many Japanese clients in Asia for such a long time, we have a lot of experience in this region. With this expertise and knowledge, we can support German companies over there.
J-BIG: What about German business in Japan? What tendencies do you see in terms of investment?
Motoo Matsumoto: Interest in the Japanese market is growing. There are still several obstacles for German business in Japan. For example, the language barrier is a classic topic. Japanese is the primary working language in Japan, and it can be still difficult to communicate in English, although this is improving. In order for the investment activities of foreign companies in Japan to pick up, these obstacles must be overcome.
J-BIG: What do you think must happen for the investment activity from Germany to Japan to change?
Motoo Matsumoto: The FDI (Foreign Direct Investment) into Japan compared to the GDP (gross domestic product) is quite small. Still, in general, it can be said that Japanese companies, except well-established international names, seem to be a bit hesitant to accept foreign investors, due to various reasons. This needs to change. Until now, prices in Japan have been high, which has made it difficult to produce and invest in Japan. Recently, there have been some changes, such as the deprecation of the Yen, through which Japan has become cheaper than before. Also, the Japanese government is keen to increase the FDI into Japan. There are some recent examples of companies starting factories in Japan, such as the Taiwanese manufacturer TSMC. These steps, together with foreign direct investment in Japan, will surely have an impact on Japanese society. Together with the private business side, the government can play a key role in these changes. As for communication difficulties, IT tools will surely play a big role in the future in bridging the language barrier. As the Japanese society changes, we can expect more investment in Japan.