Bridge News/Bridge Money Center, 1 June 1998

By Kaya Laterman


Financial Consultants Race to Break Japan's Big Bang

Tokyo - Too bad there isn't a government hotline or an 800-number where one could call to figure out what exactly Japan's so-called Big Bang set of financial reforms will actually change.

However, the cloud of mystery that surrounds Big Bang is great news for consultants in Japan and an increasing amount of foreign consultants are banking that those lost individuals will pay a nice price in exchange to see the light at the end of the regulatory tunnel.


So who exactly are the new faces in the consulting world? Well, there are some who have branched off from larger firms to head up small start-up companies like Richard Werner, formally chief economist at Jardine Fleming Securities in Tokyo.

Werner, who is largely known in the Tokyo financial world as the 'heretic' who pronounced the current Japanese recession back in 1996, in April started a 5-man financial research firm proudly called Profit Research Center.

Werner and an unnamed silent partner opened shop to conduct financial-related research on Southeast Asia, but in particular Japan.

"As financial houses get bigger and bigger...the problem is to offer independent, objective research," Werner said in an interview.

"The bigger the companies get, the more deals they have...that aren't related to them and the researchers may not have a common interest," he explained.

According to Werner, there are 2 major trends emerging in the financial consulting business. The first is the increased concentration in the financial sector, as the government's Big Bang officially kicked in last April.

"There is a greater need for independent and objective research from people that have insights, and that are well connected, that have information, and that have the right tools to write models to conduct and write down analysis," he said.

"The second thing is that people will be increasingly ready to pay for that."

Werner says as Japanese investors have more venues to park their funds - whether it be a large securities firm or a discount broker - commission fees "are bound to come down for increased competition."

"As computers have a price, research will have a price. Information is going to be available anywhere, competition is going to be fierce, so the key is to add value and analysis. In Japan, this trend of independent research houses is not yet where it is in the US so this is a golden opportunity," he added.

Werner's clients so far include several offshore hedge funds, institutional investors, banks and the Asian Development Bank. He conceded that he would like to expand that list to corporations and eventually to governments as well.

Meanwhile, individuals are not the only ones gearing up to take advantage of the murky financial future. International rating agency Standard & Poor's in April launched a new service that helps various firms muddle through strategic business options and come up with a 'what if' credit analyses and ratings before the client embarks upon that particular initiative.

S&P's Rating Evaluation Service, launched in the US almost a year ago, helps firms who have concerns in their near-term 'blueprints' or business plans, explains Noboru Wakayama, director of global ratings development here in Tokyo.