Multinationals and the Restructuring of the World Economy (RLE International Business) by Unknown

Author:Unknown
Language: eng
Format: epub
Publisher: Taylor & Francis Group
Published: 2022-05-05T00:00:00+00:00

There have been several phases in the process of the internationalisation of Japanese banking. Table 7.6 defines the content of each phase in terms of the internationalisation of customer companies, international banking operations, methods of internationalisation and the customers of the international operation.

In the first phase, the initial step is internationalisation of customers. Here, the customers are mainly engaged in import and export dealings with foreign companies, so the most important aspects of international banking are foreign exchange operations connected with foreign trade. Capital transactions with customers are limited to shortterm finance (trade finance). In this phase, the main method of internationalisation is to enter into correspondence contracts with foreign banks. In the second phase, as direct investment overseas increases, banks raise the level of loans to Japanese-affiliated companies compared with foreign exchange business. Medium- and long-term capital transactions increase correspondingly. Banks aim to internationalise their business by building up a network of overseas branches and representative offices. In the third phase, the multinationalisation of big business develops, and foreign as well as Japanese companies become bank customers. International business extends to non-banking fringe activities, such as merchant banking and leasing, through the strengthening of branches and offices, capital participation, business affiliations and the establishing of non-bank fringe business firms. Banks seek the most profitable ways of fundraising and lending. In the fourth phase, retail banking is conducted while at the same time the content of international operations and the methods of internationalisation advance and become more complex. The aspect of the fourth phase which distinguishes it from the third phase is the declining importance of the exploitation of new businesses and methods, and the concentration instead on deepening and strengthening the activities begun in the third phase. This change can be seen in the increasing ratio of international business to all banking business.

Source: Mitsubishi Bank, Chosa, September 1974.

Our research shows that in 1977/78 four banks were in the fourth phase, seven in the third, and three in the second — in other words, it seems that, on average, banks have reached the third phase of internationalisation. This result is fairly consistent with the results of investigations into international banking business, as examined later in this section. Our research also confirms that the internationalisation of Japanese banking advanced slowly prior to the 1970s and rapidly in the first half of the 1970s, before slowing down again in the late 1970s.

What is the attraction, from the banks’ viewpoint, of international business as compared with domestic business? The present study indicates that the major attractions are (1) diversification of banking business and customers; (2) high profitability;

(3) high potential for growth; and (4) the existence of a large, flexible and free international finance market. Points (1) and (3) are consistent with the shortterm objective of enlarging the number of customers, while points (2) and (4) are consistent with banks’ proceeding to internationalise in order to attain high profitability in the free international market as opposed to the sluggish domestic financial market and the existence of various controls on domestic banking business.

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