Countries covered: Japan
Now that it has taken hold in the US, the Internet brokerage revolution is now gaining speed elsewhere in the world. Japan is set to emerge as an important participant in this next wave of Internet brokerage adoption.
Low rates of equity ownership and Internet penetration kept Internet brokerage growth sluggish in Japan through the first half of 1999. High, government regulated commissions and a preference among Japanese savers for cash deposit vehicles also played a role. But faster growth is set to occur, now that deregulation has sent commissions downward and Internet access rates continue to expand. Increasing numbers of Internet brokerage firms are opening their doors in Japan, in anticipation of this accelerated future growth, and trading costs have already declined significantly. The result of these changes will, over time, be a significant expansion of the investment options, support tools, and control available to Japanese investors.
This TowerGroup Research Note reviews the factors behind Japanese Internet brokerage's slow past growth. It reviews the changes now occurring that are positive for the future of Japanese Internet brokerage and provides an overview of the current and expected future Internet brokerage landscape in Japan.
Additional Information
Highlights
The Japanese Internet brokerage (JIB) market remains very small when compared to the Internet brokerage market in the US. Reasons for this difference include lower equity ownership and Internet penetration rates in Japan and a market structure that long penalized the small investor.
But Internet brokerage in Japan is starting to expand, and several factors account for this trend. The most important factor was the Japanese government’s decision to deregulate commissions on all stock transactions. This move sent Japanese retail commissions into free fall, and has generated new investor interest in equities. Other important factors include increased Internet penetration among the Japanese and ongoing attempts to introduce greater choice and liquidity into Japan’s equities markets.
The current crop of Japanese Internet brokers can be divided into two groups. The first, local entrants, consists of established Japanese financial services firms and technology and venture capital startups that see a future in JIB. The second group consists of US and European Internet brokers that are exporting their established brands to the Japanese market.
JIB players must carefully manage their growth and the expectations of their customers. Excessive system outages or a prolonged bear market could dampen investor enthusiasm in JIB. If JIB grows, it will result in lower prices, broader arrays of product and information, and greater customer choice. Though the focus is still largely on Japanese market access, US market access is beginning to appear. Access to other nations’ markets will also become standard.
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