Financials: Japanese Want In

It seems the Japanese are courting any US financial institution in need of funds. While their timing is more than a bit off, given recent investments in Citigroup (C) and Merrill Lynch (MER) by Eastern Investors, the news does bode well for the thesis that more and more investors are seeing value in the sector.

Mitsubishi UFJ (MTU), Mitsui Sumitomo Financial Group (SMFJY.PK) and Mizuho Financial (MFG) have pooled together $10 billion have declared they are "open to negotiation" with any struggling Wall Street bank in need of a cash infusion.

This is in a way even more encouraging news than the recent rush of investment primarily by Middle Eastern investors. The reason is the historic extreme financial conservatism of the Japanese banking sector.

Merrill Lynch did secure a $6.6 billion cash injection from a consortium that included Mizuho, together with the Kuwait Investment Authority and the Korean Investment Corporation. How conservative has the Japanese sector been? The deal represents the first time since 1989 that a Japanese financial house has taken a substantial stake American or European bank.

Disclosure: Long Citi, None in others.

Comments

[Kunst:]

Japan has an interesting problem. They are very wealthy, but their population is aging and decreasing. They don't want immigration, which means they are stuck with the problem, despite a fairly substantial foreign temporary worker (ahem) population. They need to find a way to translate their industrial/technical prowess into a long-term-care solution. Money doesn't do it all ($100 bills don't change the bed) but it's a start.

Japan is like an aging individual, who needs to translate his earlier productive success into long-term financial stability. US financials fit well into that paradigm.

2008 Jan 18 01:47 AM