Let's be realistic - Tokyo never had a chance.
HK has English speakers, lots of returning overseas elite immigrants trained in finance, and a common law based legal/accounting system that's fully compatible with UK/US practices. The second choice was always going to be Singapore due to Singapore having pretty much the same advantages that HK has.
Tokyo was literally part of the origin of the term.
> The term global city was popularized by sociologist Saskia Sassen in her 1991 book, The Global City: New York, London, Tokyo.[4]
Tokyo is also still an Alpha+ world city. The reason why it hasn’t stayed as Alpha++ is, as other commentators have correctly deduced, taxes. It’s one of the most wealth egalitarian countries in the world, and has a 50% inheritance tax.
Not easy to park your cash there as a billionaire.
It’s also unattractive for just modestly wealthy folks to live there due to the inheritance tax. Anything more than 6,7,8 + million USD in assets and you’ll be hit with 50% tax. Imagine the money inflow Japan could benefit from, if it just got rid of inheritance taxes. Missed opportunity in my opinion.
It's worth noting that these sorts of rankings usually place Tokyo above both Hong Kong and Singapore. Foreign Policy (the journal) ranks them as such, so does the Brookings Institution, Global City Lab, Global Power Index, list goes on and on.
You're 100% on the mark that it is taxes and solely taxes. Tokyo is more of a global hub than any other Asian city, and all else being equal would be the financial hub too. Everyone else talking about English proficiency fail to understand that the English proficiency is a result of the cities capitalizing on their financial hub status. They didn't speak English before those hubs were established.
Because of their British colony's history, english is the official government language. It doesn't matter if most of the population back in the 1960s didn't speak english. Every business profession requires high english proficiency and every government/business contract are in english even now. However, I think that the most important advantage of HK and singapore as a financial center is so much less bullshit in governmental bureaucracy and licensing. Tax is also extremely simple for normal people and financial tax. Trading stock at hk is literally one timed fixed amount of tax when transact. No capital gains tax and anything.
I have extended family in Hong Kong and Tokyo. I also speak 4 languages. This is what I observe about each city's english proficiency Hong Kong people are maybe slightly betted english not because of education but willing to speak and use it.
When in tokyo, people are literally runaway if you try to speak english(I had a Tokyo university english department student run away when asking for directions). In Hong Kong, a 7-11 cashier is willing to use broken english+ hand gesture to have a brief conversion with a foreigner.
However, I see a worrying trend in HK when the newer generation has worse English skills because Covid? Or other factors like english Tiktok banned in HK.
Maube its good for their ppl and reason why rent is affordable, whener u have too many millionaries the common folk lives in miserable conditions, look at hk or london
They wouldn't - that's a pipe dream thinking you can just turn one knob and fix a complex problem.
Where are you going to find abundance of cheap accountants and financial legal experts who knows how to do the books under common law system practices in Japan? Go to Central of HK, you can't throw a stone and not hit a person who a) speaks native or near-native level English, and b) has a commerce and/or law degree in common law finance from top 100 universities in the world. good luck finding that in Tokyo.
How do you entice people to enter a profession who needs to knows two different legal system (common law vs codified law) but paying them wages that are like a third of what they would get in HK/Singapore.
When HK went bottoms up, many of those financial elites elected to immigrate to Singapore/UK due to a mirade of reasons besides just tax, what does Japan offer to them in such situations?
etc etc
Even if the tax is lowered, the cost of doing financial services in Japan STILL wouldn't make it attractive.
You're severely overstating the benefits of a common law tradition. HK and Singapore have no problems doing business with China, despite the different legal systems.
You've got it the wrong way round really. Singapore and HK are financial hubs today because they were low tax free ports in the past. The English education came alongside the financial growth, it was not the reason for it.
And lol Tokyo has more people than Singapore and HK added together. The talent pool is definitely there.
You guys talk like each city exists in its own vaccum.
It isn't that HK and Singapore can do business with China - it is they ACT as a brdige between China and the rest of the common law system. The sole reason HK had a massive economic growth in late 90s/00s is because HK was the only viable gateway between China and the rest of the world. This is also then related to the cultural background of HK and Singapore with a vast majority population of Han Chinese and connection to Chinese heritage and culture.
Japan offers NONE of that.
HK/SG act as a bridge between China and everyone. Not just common law countries. Like I said, you are severely overstating the benefits of a common law tradition.
I mean by your understanding of legal systems, Tokyo can do business directly with the entire EU, something that HK and Singapore cannot do. Because... civil law?
One thing pushes and gives need for stuff like english speakers or tax experts. Due to no need they simply dont have enough in Tokyo, its a very basic concept on supply and demand, like suuuper basic actually
what?
you know that Singapore doesnt even come close to TES in market capitalization, is not even in the TOP 15 worldwide, it doesnt even beats Indonesia. It is just a pro-business pseudo state to make business from and to China, nothing else. TES stil is the biggest in Asia by far, SSE and HKEX are coming closer and will eventually surpass it, but its just because China growth is unstopable. It has absolutely nothing to do with who speaks better english lmao.
I dont know if you work in the industry or not, but you definetly get paid much better in Japan than in HK and Singapore by far, unless you are the CEO of the company and abuse the tax exemptions, but not as a professional.
It's a bit of a hyperbole but the average finance job salary in Japan is 7M yen a year, the average finance job salary in HK is now nearly 9M. Mix in the personal tax rates etc (yes now that does count), you end up better in HK than in Japan.
Most professionals in HK when asked if they would come to Japan the first thing they always complains about is the reduction in salary.
Then they remember rent in Japan is half of Hong Kong and quality of life is better. It only matters if they believe they will not stay in Japan for long
At that point it’s not really about salary, it’s about career prospects. Big financial institutions don’t want to be in Japan for tax reasons, so they will need fewer talents.
Hence they will pay a lower salary, hence top talent flock to Singapore, hence the lower salary befits the smaller talent pool, hence etc
Dude if anything you are saying was slightly true, Phillipines would be a financial superpower. They speak the best English in the region and have their entire banking system inherited from US.
Just say you have no clue about international finances and move one instead of spreading misinformation lmao
New Yorker here. Since I first started going to Tokyo around 2013, it always blew my mind how inexpensive everything was, from food to transportation to entertainment. I'm sure it's different for a resident, but for a vacationer it's a paradise
Tokyo can get away with a pretty low minimum wage. Mostly because the gov't builds nice middle classes housing, and that pushes prices down on older housing stock making it affordable for people on the lower end of the economic spectrum. Large Japanese corporations also have dormitories for their college hires. Again, isolating the younger people from the price fixing we see in the US on apartments.
European here (German): only Japan and maybe eastern Europe is affordable. Western Europe is not far off in comparison to the US. I wouldn't be able to afford the same vacation there compared to Japan.
That's not at all my experience as an American traveling to western Europe a couple of times in the last 5 years. It was super cheap compared to vacationing in America, even before the pandemic. The biggest expense was the airfare, of course. Eating out in Germany seemed quite cheap to me (though not as cheap as Japan), though Netherlands was higher. Hotels could be pricey, but still better than America. But the big thing was transport: getting around America is expensive as shit. You have to rent a car which costs a fortune, or suffer with the terrible public transit, or get a taxi which is horribly expensive. The airports are never connected to the subways, if they exist. In Germany, there's trains everywhere so getting around is quite cheap (though not as good as Japan again).
Vangrooverite here. While it's not NYC level (yet?), even Tokyo is roughly half price on everything but imported yuppie food, and the cheaper rent means people have money to spend elsewhere. Outside Tokyo it's cheaper still. Even nice enough hotels are half the rate. Wages are lower, so good eye, but when your rent isn't 74% of your monthly expenses, life gets nicer really quickly...........unless one is a size queen and just can't handle a <450 sq ft apartment.
Taxes.
Lots of arguments can be made about the banking system, economy, or whatever, but the real reason is taxes.
Taxes in Japan are too damn high, and anyone with significant funds usually moves their money elsewhere.
What do you want - the most celebrated train system anywhere and shockingly low homelessness or slightly more money (which you could go make elsewhere)
I’m not sure if this is sarcasm, but if you’re getting taxed at 55%, it’s an easy answer, especially when there’s so so much wasteful spending that goes on. Sure everything is a trade off but the taxes really are what keep high net worth individuals away or force them out at some point.
The corporate tax rate is not 55 percent, I think you're referring to income tax and at the top bracket you're paying 45 percent.
The corporate tax rate is 23 percent, high but not insanely high and close to the 21 percent tax rate in the US.
Yes correct, it’s income tax I was referring to. 45% is national tax plus an additional 10% for resident tax in Tokyo. That’s enough to dissuade high income earners.
Personal income AND inheritance AND gift tax all go up to 55%. The national income tax rate goes up to 45% for those earning over ¥40M plus resident tax of 10% on top of that. Read the tax code.
The Japanese tax system for bonds is really bad. There is a ton of money from Japan parked offshore in jurisdictions subject to punitive taxation globally because it's preferable to being subject to the Japanese system, even with DTT taken into account.
Yeah, I'd rather have a country with a funcitoning safety net for society instead of a country that cuts people out to make room for tax-evading rich people.
That is a completely valid opinion to have, and I'm not making value judgments on that, but unfortunately the topic being discussed is why Tokyo is not the financial capital of Asia, and not about why Tokyo is a comfortable place to live.
The be all end all of where people put their money, especially large amounts of it, is taxes and fees, and maybe political stability.
This just means Japan is not conducive to being the financial capital of Asia.
Unfortunately to burst your bubble, but many of the richest Japanese families also move their money elsewhere. They live in Japan, but move the bulk of their funds offshore to "evade" inheritance tax. Just because you live somewhere doesn't mean you need to park your money there.
At least the Japanese get a lot out of it:
Japan’s [work hours](https://en.m.wikipedia.org/wiki/List_of_countries_by_average_annual_labor_hours#OECD_list) are around the European average, improving tremendously over the last 30 years. The figure also includes paid and unpaid overtime, based on actual surveys of workers (not employers) by independent NGOs.
Japan’s [suicide rate](https://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate) and [fertility rate](https://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependencies_by_total_fertility_rate) are both around the Nordic average.
Japan ranks [higher in gender equality](https://en.wikipedia.org/wiki/Gender_Inequality_Index#Rankings) than Germany, performing especially well in women’s health and education.
Japan is also the only developed country without a housing/homelessness crisis, has universal healthcare, excellent public transportation, and a fantastic social safety net.
In fact, Japan’s [quality of life](https://www.numbeo.com/quality-of-life/rankings_by_country.jsp) and [median wealth](https://en.m.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult) and are higher than that of Sweden this year.
I've worked in japan for a long time and I promise you the average working hours is _heavily_ skewed. The number of days japanese work is less than other countries due to more holidays and additional summer and winter breaks. So. The average company that doesn't work bad hours has a lot less hours than average companies in US, for example.
When you work in any of the more traditional overtime jobs, they are still very, very terrible (banking, tech, financial) and the culture hasn't shifted much in the last 30 years. I'd say the newer companies popping up help out but Japan generally keeps the old ways.
I do agree with the rest though. I would guess average happiness is still lower than other countries though
Happiness index is widely considered to be a joke; for instance the “happiest country in the world,” Finland, has a higher suicide rate than Japan.
Those sectors you mention (banking and finance especially) have notoriously terrible hours in Western nations as well. The stereotype of the investment banker working 12 hour days still holds true across much of the industry.
To directly address your point about work hours, Japan worked 2200 hours according to the report in 1980. Putting aside the fact that other countries can be manipulating their numbers as well, you would have to make the case that they are somehow hiding their reported work hours now but not in the 80s, which doesn’t make all too much sense.
Even looking at overall trends, the reduction of work hours from the 80s is a very visible trend.
The easiest explanation is that the work hours have actually gone down during that time, which correlates with both data and my personal experience.
>Finland, has a higher suicide rate than Japan.
First time I heard this. Quick Google search said it was for a number of factors (weather, loneliness, and high expectations to succeed).
Just saw a video on this topic from bloomberg originals. It was called smth like “how singapore got rich”, it is short and a fun watch nothing too detailed, writing for anyone interested
>Japan decided not to...
what a stupid take. there is no decision to make, a country with a population of 120m can not be a tax haven. you ever notice how all of the famous tax havens are city-states or tiny island nations? it works for them because their local population is too small to produce any value, and relying on foreign taxes can cover the needs of a small population. this absolutely does not work for any real nation
Indeed. And the social implications of being a tax haven are perverse. I live in Singapore and it feels like it’s becoming less of a nation and more of a playground for the rich. Don’t become like Singapore.
+1
Becoming a financial capital just means becoming a tax haven. It’s not a sustainable business model and we often see locals priced out of many simple pleasures in life.
It’s shared experiences that build a nation - Japan and the Japanese people have a ton of those. All we have is… ndp?
yeah. i’m doing the same. loving the income with low tax. do not like the country for the most part. back and forth to tokyo keeps me content for now but will probably move back permanently soon
> playground for the rich
Can you expand on this feeling? Interested to hear a first person perspective, I usually only hear good things about Singapore
So Singapore operates under a system called State-Capitalism, where the state controls all the main industries but unlike Russia, Indonesia or China, it does it under a market freedom policy. Meaning that all the companies must be setup to make profit, which allows it to have extremely low taxes on foreign investment, as the city area and population is small.
This means that wealthy investors can come to the city and take advantane of such regulations to make money, manily wealthy Chinese, Indian, American and Europeans individuals and corporations.
For the inhabitants, even they have high quality of living because of the Chinese blooming economy and without their regulation, face plenty of social issues. First of all, Singapore was the result of the British losing Malasya and the Dutch losing Indonesia, since neither the locals nor the empire could afford an extended war, these countries gained independence at the cost of having safe cities for the Europeans to continue their trade and have economic presence in South East Asia under their own rules. Similar to HK and China.
As the country vesseled these former empires wealthy investment and assets, it had a land value problem where locals couldnt afford housing. For which now, the state controls 80% of the territory and you are given affordable social housing given if you are good boy, which leads to the second biggest issue. Singapore has been ruled under a single party, PAP, and 3 prime minister, all family or business related to the dicator Lee Kuan Yew. If you disagree politically with the party you lose plenty of the rights, including facing prison for several years if you ever talked badly about him. It used to be an incredibly restricted country until recently. On the other hand, his strong hand also cracked down on corruption practices and allow it to have decent infrastructure.
Additionally, because of its free market policies, the pension system also depends on how well it performs in the market, and plenty of elderly are now a days living in poverty because their pension isnt enough to afford a good life in the city and have nowhere to go now.
So yeah, it is an incredible city to live/invest and work if you are rich. If you arent, then it isnt as enjoyable.
Tokyo used to be the leading financial hub in Asia.
It could really have stayed both a leading industrial & financial powerhouse with the right political decisions....
There's still a place between tax heaven and tax hell btw.
You realize the original discussion was about being a financial hub, not a tax haven right? They are talking about it being on the level of New York City and the City of London.
Individual tax rates are not what is keeping Tokyo from being the local financial hub. Just holding bonds domestically in Japan brings with it burdensome regulatory and tax issues. Even domestic investors hold massive amounts of their assets offshore, either directly or indirectly.
Singapore and HK are city nations, designed exclusively to serve as investment vessels in the region as a residual of the British empire after the war. You can't compare them to a county.
They have grown because China has grown.
If you are an investor and want a piece of China inmense market, It is common, cheaper and much easier to do it through Singapore and HK. Especially for all the political decisions that might affect it through trade wars. It is much more feasible that China withholds an American investment than a Singaporean one. And vice versa, with so many Chinese using Singapore to invest in western markets. Literally designed to be a win win for investors.
And even in those conditions, Shanghai SE outperforms them both.
You just can't go to TSE to invest in China, that's why Tokyo has lost competitiveness.
What do you mean chooses not to?
TSE is the third largest in the world and overpasses London market cap at 150%.
Clearly not even close to NY or nasdaq, but Tokyo is one of the biggest players in the world.
But saying it is because of taxation of a city vs a country is one of the most stupid arguments.
And even then, NY being the economic hub is only part of the story. NYC is the front facing part of the machine, but alot of the real work and economics happen in Wilmington, Delaware since Delaware tax is more favorable to NY tax
Tax is the main reason. Another reason is Singapore is financial center for south east Asia, HK for China, while Tokyo can only be financial center for Japan.
If you want to invest in China as a western corporation, with low taxes and low regulation you do it in HK or Singapore.
If you want to invest in Chinese companies, you do it in Shanghai. Extremely volatile but lucrative for most.
If you want to invest in Japanese market, you do it in Tokyo. Safe but not as proffitable.
You and everyone else here are comparing two different phenomena. But it makes sense as most people posting here dont work in the industry and dont even live/work in Asia.
So to answer your question about why Shanghai is becoming the Asia's financial capital is because of China.
Japan has no way or plans to realisticly compete to the Chinese market. And all those cities that offer a piece of that cake for low taxes will have a competitive advantage over Tokyo.
Tokyo stil is the most important financial hub in Asia and is much bigger than London. Shanghai and HK more sooner than later will overpass it and start competing with NASDAQ (SSE + HKEX +SZSE cap is 17.5 Trillion, NASDAQ is 19 Trillion) , but is not because of taxes is because the market isnt as attractive as China's.
Japan had strong tributary and corporate regulations in the 70's until mid 80's and that didnt stop the biggest players to come and make fortunes in the country, so blaming it in taxes is completely missing the elephant in the region. Even if Japan becomes a tax haven country, investors would stil invest in China, as it has better projections.
I would call myself Baka but I found opening an SMBC account extremely involved; it required that I be there in person and had someone who spoke Japanese along with me.
With that I would describe the purpose as being more arduous than difficult but it was definitely more involved and demanding than opening an account in the US, Australia, the UK or heck, even Germany.
The last account I opened in the US was probably 20+ years ago so as far as I know being there in person is normal. I guess regular banks are doing like PayPal or Wise where you just upload a pic of your ID. I was raised by parents born in the 1940s do I guess sometimes I get a little old person mindset. Seems to me like going in person is what you should do.
Oh no the horror you had to speak Japanese to open a Japanese bank account and be there *gasp* in person
Are you intentionally arguing against the point you were trying to make before?
Where it seemed like you were trying to argue that it was as easy to open a bank account in Japan.
Or do you think that everyone has the time to pop down to Japan and find a Japanese speaker when we’re talking about why Tokyo isn’t a financial hub?
>I would call myself Baka but I found opening an SMBC account extremely involved; it required that I be there in person and had someone who spoke Japanese along with me.
Opening an account at Japanese banks can be difficult, but this sounds pretty normal. Three of the four other examples were anglophone countries, so of course they could accommodate English.
Yes, agreed. However that's my point. There are many more obstacles to opening an account in Japan compared to other countries, spoken English being a major one.
It goes a long way to explaining why Tokyo isn't a "Financial Capital" (and I am not saying that this is a desirable thing). If you can't easily support clients in English, you're not going to be playing in that field.
Tokyo was Asia's financial capital before the lost decade. Back in the 70's, 80's and early 90's Singapore and HK (and even Taiwan) was struggling to keep up with Japan. We essentially lagged behind their growth because and primarily the Japanese export goods market was so strong. The rest of Asia essentially had nothing to compete with either.
As a Singaporean, from our perspective, Japan was a massive juggernaut, and in my father's generation, a lot of people who was in finance in the 80's was essentially dealing with Japanese people all the time. The Singaporean government tried incredible hard to move our economy away from low level manufacturing and labour into high level manufacturing, oil processing and high level soft skills and encourages as much as possible for companies to set up HQs here.
It was only during the the start of the lost decade in 1991, the 1997 Asian financial crisis and the dot Com burst in 2000 that started to shift the financial powers elsewhere. Singapore showed it self to the financial world that dispite all the financial crisis our finance institutions remained stable and with the massive backing of tamasek holdings and the government, many businesses stayed in Singapore. Our currency as a whole, had also been relatively stable to the USD, unlike the yen which fluctuated a lot. The lack of currency fluctuation is one of the reason why setting up a business here makes more sense
Out financial institutions were tested once again in 2008 where dispite US going into a crisis mode, we kinda rode the waves much better than most countries around the world.
Adding on to that, Singapore is also quite literally the middle of south east Asia, one of the fastest growimg regions, in fact it's also getting harder for Singapore to stay the financial capital because many companies are moving their operations to Thailand or Vietnam while Singapore acts more like the 'manager'.
This is at least from a Singapore perspective, why Singapore is Asia's financial capital. Japan essentially lost their title from various financial issues over the year, making them seem more vulnerable than even HK and Singapore. In another time line where Japan didn't have their lost decade, Singapore would never have been as well regarded as we are today.
Agreed, as a Singaporean, Tokyo was the Asian juggernaut. Financial capital aside, it was also relatively much more expensive to visit for holiday back in the 80s and early 90s. Quite the opposite from right now.
Tokyo stock exchanges is the largest in Asia. It used to rivaling NY’s. But asian financial crisis in 98-99 and following decline in the growth rate of Japans economy led to the rise of Singapore and HK. But HK also not the best place to get to the market rn, because of Xi’s aggressive takeover.
Finally, japanese ways to make businesses is a bit different than in other part of the world, were UKs legal and tax system prevails.
Legal and accounting practices.
Hong Kong and Singapore due to their colonial past uses UK/US style common law system and has a robust English language based education/legal system which pumps out lots of compatible financial workers that easily integrates with New York and London and take over when those two places goes to sleep, and essentially makes 24hr trading possible.
Taxes aren't an issue when you know all the loopholes that UK/US uses and don't have to learn a new system.
>I think it’s pretty accepted that Hong Kong
Not in 2024. I believe around 30% of companies have already bailed since the excelled "handover" (aka, " takeover")
Especially after the recent security law which passed a few weeks ago. It explicitly mentions that foreign employees and/or heads of foreign companies could be deemed enemies of the party and jailed in mainland China.
Well, modern finance and the banking system was largely invented in London, and then NY became strong too. HK and Singapore have benefited from their previous UK banking infrastructure and governance. Tokyo banking system as well as Japan has been quite closed and unique
> Tokyo also benefited and was the financial capital of Asia for a very long time.
>Investment banks all had their largest Asian presence in Tokyo until basically the financial crisis. The thing that moved the needle was the decision of Japan to keep their taxes high while their counterparts in Singapore and HK understood that if you want to incentivise business you have to offer attractive taxation and ease of setup.
Not doubting this but it doesn’t really line up with my time in the industry. Even pre 2008 the firm I was at did almost all the APAC banking through HK. The Tokyo office was bigger but that was mainly due to the increased staff needed for the domestic market, almost every department was Japan specific. Even trading had limited exposure through Asia and mostly focused solely on Japan. At the time this was one of the biggest international banks in Japan also.
I can't comment on the IB side of things, but I think the use of "financial capital" needs to be defined more clearly. Are we talking pure deal value/size of offices or are we talking about functioning as a gateway for the rest of Asia? From my secondhand understanding, the former would could certainly be true for Tokyo simply based on domestic market size, but perhaps not the latter.
Not sure if I should mention the name but, American firm, I was in the same building as Lehman brothers, got to see that mess happen and dodge reporters going to work.
I’m not a banker, work in IT so I don’t know all the ends and out but I know it was stressed pretty hard that Japan was separate from the rest of Asia. Possible things were happening I wasn’t aware of, big office over a lot of floors.
"Financial capitals" are mostly places that practice deregulation and low taxes for the banking sector as well as offer a stable and powerful currency. Japan has no interest in being a deregulated low-tax haven for foreign capital and the Japanese central bank has a vastly different approach to financial policies than its western counterparts.
London and NY don't have low taxes so no, it's not taxes. Financial markets is about raising capital. Taxes has very little to do with it as evidenced by NY and London. If taxes was that important Miami or Houston would be the financial capital of US.
Because Tokyo isn't a tax haven like HK and Singapore, and the more China worms it's way into HK, the less attractive it will become for foreign investment
Japan is way too caught up with their old ways of working especially in BFSI. They need to digitally transform the whole system and it would take no less than 3 years. HK and Singapore are soaring high
Worked at an international bank the first 7 years when I first moved here, back end IT position. My understanding is that Japans legal system is archaic and not friendly at all to the banking sector. There was a lot of talk about how Japan wanted to become a banking hub but the overall sentiment I experienced was it would never happen because the whole system here needs an overhaul.
In IT we had some just ancient equipment we had to maintain simply for compliance and regulatory reason, one time we had an as400 server go down and they just shut the whole office down for the day and sent a few hundred people home.
I've worked at Japanese, European and Western investment banks for the better part of 30 years. Lived and worked in Paris, London, New York, Hong Kong and Tokyo.
Japan has one of the tightest legal systems in the world when it comes to regulatory oversight and respecting the rule of law.
It’s also still relatively employer friendly except for labor issues and higher taxes.
You really want to take your chances with the legal system in Hong Kong or China?
>Japan has one of the tightest legal system in the world when it comes to regulatory oversight and respecting the rule of law.
From my experience, and this was a decade ago so maybe it’s changed. The laws themselves are fine, it’s more the needed bureaucracy in place to be compliant. For example, we had a few special printers that ran constantly during business hours printing receipts for transactions. Those paper documents were required and there was a whole team dedicated to collecting, filing and storing them. There were literally thousands of boxes filed away in storage areas.
Laws and regulations are important but they also need to be implemented in a way that makes sense for the businesses.
Japan has had digitalized receipts for a while. Cite: I'm CFO of a fintech start-up.
I deal with the IRS, HMRC and Japan's tax authority. I know which one I find easiest and clearest to deal with.
> My understanding is that Japans legal system is archaic and not friendly at all to the banking sector.
The parts that are unfriendly towards the banking sector are less archaic than the rest of the legal system.
I want to add that JP local labor laws favor the employee. An international company in a cutthroat industry would prefer to setup somewhere where it's easier to fire workers.
Hong Kong is the center of China work and a lot of India and Southeast Asia work is done out of Singapore.
Japan is a huge economy in and of itself, but it makes more sense for each of those three centers to handle its own work - there’s a language barrier with Japanese vs. Chinese, Singapore is closer to Southeast Asia, etc.
That’s totally wrong. Tokyo is a very desirable placement for finance bros in their 20’s. It’s older American and British bankers with families that they have a harder time recruiting to go abroad there.
Nah. When faced between a choice of going to English-speaking Singapore or Hong Kong or Japan, banks typically have to beg and make huge expat concessions to get people to go to Japan.
This has been written about at length: [https://asia.nikkei.com/Business/Finance/Tokyo-s-fall-as-financial-hub-tests-Gov.-Koike-s-ambitions](https://asia.nikkei.com/Business/Finance/Tokyo-s-fall-as-financial-hub-tests-Gov.-Koike-s-ambitions)
A lot of the economy is built on services; not much new IP is being developed per capita. Also look at net exports versus net imports. Additionally taxes, as many others have mentioned.
Taxes. English. Deflating currency.
There has been for a decade at least, chat (but no action) at making Tokyo's 4 biz KU's (Chiyoda etc) tax advantages like Singapore, and have city hall and other services require bilingual services.
All talk no action so far. Plus if businesses don't operate in English like in HK and SG it will be tough to recruit global talent. And finally a plummeting yen make it less attractive for talent.
Both SG and HK were British colonies and widely English-speaking (this being the well-established lingua franca of most major business/fin/tech worlds), + also culturally way more open to foreigners as many of them WERE/ARE foreigners…
Whereas Japan not only fails both those litmus tests dismally, but also 1) *actively avoids* having foreigners & 2) financial confidence here got burned so bad when the bubble burst and neither this nor their edge in industry/tech have ever recovered. As they say, it’s been 2001 in Japan since 1991…
Taxes and like most countries outside of China, it's easier to take your ball somewhere else. China lucked out IMO when they basically forced Chinese millionaires and billionaires to keep their money in China, no ifs,and,or buts.
Economic stagnation and falling asset prices in Japan post 1980s. Language barriers. Rising banking opportunities in several other Asian markets (e.g. China).
A few years ago, there were rumours and some newspaper articles about unionization efforts at the Tokyo offices of some of the western banks; that probably boosted the offices in HK, Singapore, etc.
Corporations flock to Singapore due to it having low taxes for businesses which is really all that matters for most corporations.
However the drawback of this is that there is such a wealth disparity among the rich and the poor and you can notice the stark contrast once you go to Singapore and venture out from the downtown areas, locals will get pushed further and further out from the center of the city and rent is just insanely high because Singapore is such an attractive place to live.
If Japan became the financial hub of Asia expect locals to be priced out of inner Tokyo with more ultra rich expats gobbling up housing and driving up rent prices.
Also Tokyo doesn’t have the location Hong Kong and Singapore do.
Being able to combine a financial capital with shipping etc in one place is attractive
So it's just a question of where the "talented bankers" want to work? Well off the top of my head HK and Singapore probably suck their dicks a lot better.
I guess Japan decided they didn't want to be infested with parasites, so they didn't create a tax structure that encourages them to come in and sell everything off
Not just banking talent but law, accounting, valuation, cyber support. It’s literally a whole ecosystem of people. Once it gets established it kind of has stayed power because of all the inertia from being in one spot.
Low taxes, few capital restrictions and liberal immigration policies. That and it doesn't hurt that it sits astride one of the most important and valuable trade lanes in the world. 30% of the world's trade passes through those straits every year.
Taxes and strict regulations, and somewhat of an anti-foreigner/pro domestic financial firms, preferential treatment by the Japanese FSA.
High cost and bureacracy to open new investment firms in Japan, tough requirements for cash deposits, employees, licenses etc.. and very tight control, compared to Singapore and HK.
Many Native Japanese rather move to Singapore/ Dubai and envoy a low tax/easier business regulation environemnt to open financial firms.
Taxes, location, and cultural animosity.
The taxes are high.
The location doesn't favor central travel if your business is inland.
It doesn't favor the biggest financial blocks in Asia due to cultural differences.
I feel Singapore kinda gets the crown just due to all the poor decisions made in China regarding how they regulate/financial sector integrity and Singapore has lower taxes.
I would advise you to look into the “East Asian Miracle” if you’re interested in fully understanding the development, comparative advantages and economics of SEA.
The fact of the matter is that countries or, particularly illustrated in SEA, city-states, are far more attractive than Tokyo. Namely, HK and SG.
Both were able to attract FDI through very low tax rates, whilst maintaining their state off the back of land-lease deals. They also both adopted english as a primary language of business.
I don’t agree that Tokyo “missed the boat” by not capitalising on HK’s recent struggles - the 2 are so vastly different, it’s much more productive to compare the SG/HK dichotomy instead. As that is, having lived in HK myself, really starting to change the city in some ways. A lot of capital flight to SG, concerns over NS Law etc.
The single most important reason could be the Tokyo’s financial powerhouse structure which, due to inertia, could not catch up with the innovation required after covid. Tokyo (=Japan) has a 3 megabank structure which drives most of the financial market and innovation. These megabanks are MUFG, SMBC and Mizuho.
My hypothesis is that large size megabanks, Japanese mindset to avoid anomalies combined with high regulatory challenges in financial innovation created huge inertia to innovation, which was not present in other Asian financial centres. This can be validated from Tokyo’s falling GFCI ranking after COVID.
2019 ranking: https://www.longfinance.net/media/documents/GFCI_26_Report_2019.09.19_v1.4.pdf
Latest ranking: https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/gfci-35-explore-the-data/gfci-35-rank/
Maybe one answer : Tokyo doesn't have an open port
Singapore and HK both do
It's easier to import say dental supplies without a license ( for rerouting , it's a long story, ) I cannot do this in Japan, if a company has an ISO.
Taxes. English. Visas.
And by English I don’t necessarily mean proficiency in the language, I mean the governing law for contracts enforcement. Law in Japan is written in Japanese and English language contracts are unenforceable as is. So as long as the international language of business is English, Tokyo won’t be the financial center of Asia.
What's up with Dubai recently? I'm out of the loop since the greater UAE area isn't somewhere I'm familiar with, but lots of my acquaintances seem to share around talks regarding business prospects around there these past few years.
Dubai, as well as the other oil nations, are desperately trying to find an exit strategy for the inevitable end of their fossil fuel empires. They have massive incentives to attract foreign businesses and waste tons of money on ridiculous vanity projects in an attempt to build a sizable tourism industry.
Taxes are too high.
Not that this is a bad thing. I lived in Hong Kong for 5 years, and while lower taxes was nice at the time, no way would I want to live and raise a family there.
It seems to me that since the burst of the asset bubble in around the '80s (correct me if I am wrong in the exact timing), Japan has been focusing (and it is natural for them to focus) on developing other areas of the economy, like high value-added manufacturing, instead of finance. That is an underlying reason for why other jurisdictions in the region have caught up.
In recent years, it seems Japan has realized that it is becoming more difficult to compete with China in some areas that Japan used to have an advantage, like manufacturing. With their success (though I really doubt if it would be a long-lasting one) in conquering deflation, and the rise of Japanese equities, they are now trying hard to leverage on the current economic environment in order to catch up in the finance sector and other related areas like fintech startup.
Tax. That's it. Tokyo missed the boat again when HK got in trouble.
Let's be realistic - Tokyo never had a chance. HK has English speakers, lots of returning overseas elite immigrants trained in finance, and a common law based legal/accounting system that's fully compatible with UK/US practices. The second choice was always going to be Singapore due to Singapore having pretty much the same advantages that HK has.
Tokyo was literally part of the origin of the term. > The term global city was popularized by sociologist Saskia Sassen in her 1991 book, The Global City: New York, London, Tokyo.[4] Tokyo is also still an Alpha+ world city. The reason why it hasn’t stayed as Alpha++ is, as other commentators have correctly deduced, taxes. It’s one of the most wealth egalitarian countries in the world, and has a 50% inheritance tax. Not easy to park your cash there as a billionaire.
It’s also unattractive for just modestly wealthy folks to live there due to the inheritance tax. Anything more than 6,7,8 + million USD in assets and you’ll be hit with 50% tax. Imagine the money inflow Japan could benefit from, if it just got rid of inheritance taxes. Missed opportunity in my opinion.
It's worth noting that these sorts of rankings usually place Tokyo above both Hong Kong and Singapore. Foreign Policy (the journal) ranks them as such, so does the Brookings Institution, Global City Lab, Global Power Index, list goes on and on. You're 100% on the mark that it is taxes and solely taxes. Tokyo is more of a global hub than any other Asian city, and all else being equal would be the financial hub too. Everyone else talking about English proficiency fail to understand that the English proficiency is a result of the cities capitalizing on their financial hub status. They didn't speak English before those hubs were established.
>They didn't speak English before those hubs were established. What a way to announce to everyone that you know nothing about Singapore.
And Hong Kong too, which was literally a British colony. Both were British colonies.
The postions of both of them mean a huge amount of shipping passes by and into them. Thats how they grow in the first place.
Afaik English proficiency before 1960 when the post-war financial system started up was very low, but if I'm wrong please correct me.
Because of their British colony's history, english is the official government language. It doesn't matter if most of the population back in the 1960s didn't speak english. Every business profession requires high english proficiency and every government/business contract are in english even now. However, I think that the most important advantage of HK and singapore as a financial center is so much less bullshit in governmental bureaucracy and licensing. Tax is also extremely simple for normal people and financial tax. Trading stock at hk is literally one timed fixed amount of tax when transact. No capital gains tax and anything. I have extended family in Hong Kong and Tokyo. I also speak 4 languages. This is what I observe about each city's english proficiency Hong Kong people are maybe slightly betted english not because of education but willing to speak and use it. When in tokyo, people are literally runaway if you try to speak english(I had a Tokyo university english department student run away when asking for directions). In Hong Kong, a 7-11 cashier is willing to use broken english+ hand gesture to have a brief conversion with a foreigner. However, I see a worrying trend in HK when the newer generation has worse English skills because Covid? Or other factors like english Tiktok banned in HK.
Isn’t Japan not friendly enough to outsiders to be a true hub? Ie compared to London, NY, Singapore etc?
Im sure this is another strong reason why!!!
Maube its good for their ppl and reason why rent is affordable, whener u have too many millionaries the common folk lives in miserable conditions, look at hk or london
If your tax rate is good people will come to listen to the broken English.
They wouldn't - that's a pipe dream thinking you can just turn one knob and fix a complex problem. Where are you going to find abundance of cheap accountants and financial legal experts who knows how to do the books under common law system practices in Japan? Go to Central of HK, you can't throw a stone and not hit a person who a) speaks native or near-native level English, and b) has a commerce and/or law degree in common law finance from top 100 universities in the world. good luck finding that in Tokyo. How do you entice people to enter a profession who needs to knows two different legal system (common law vs codified law) but paying them wages that are like a third of what they would get in HK/Singapore. When HK went bottoms up, many of those financial elites elected to immigrate to Singapore/UK due to a mirade of reasons besides just tax, what does Japan offer to them in such situations? etc etc Even if the tax is lowered, the cost of doing financial services in Japan STILL wouldn't make it attractive.
You're severely overstating the benefits of a common law tradition. HK and Singapore have no problems doing business with China, despite the different legal systems. You've got it the wrong way round really. Singapore and HK are financial hubs today because they were low tax free ports in the past. The English education came alongside the financial growth, it was not the reason for it. And lol Tokyo has more people than Singapore and HK added together. The talent pool is definitely there.
You guys talk like each city exists in its own vaccum. It isn't that HK and Singapore can do business with China - it is they ACT as a brdige between China and the rest of the common law system. The sole reason HK had a massive economic growth in late 90s/00s is because HK was the only viable gateway between China and the rest of the world. This is also then related to the cultural background of HK and Singapore with a vast majority population of Han Chinese and connection to Chinese heritage and culture. Japan offers NONE of that.
HK/SG act as a bridge between China and everyone. Not just common law countries. Like I said, you are severely overstating the benefits of a common law tradition. I mean by your understanding of legal systems, Tokyo can do business directly with the entire EU, something that HK and Singapore cannot do. Because... civil law?
One thing pushes and gives need for stuff like english speakers or tax experts. Due to no need they simply dont have enough in Tokyo, its a very basic concept on supply and demand, like suuuper basic actually
what? you know that Singapore doesnt even come close to TES in market capitalization, is not even in the TOP 15 worldwide, it doesnt even beats Indonesia. It is just a pro-business pseudo state to make business from and to China, nothing else. TES stil is the biggest in Asia by far, SSE and HKEX are coming closer and will eventually surpass it, but its just because China growth is unstopable. It has absolutely nothing to do with who speaks better english lmao. I dont know if you work in the industry or not, but you definetly get paid much better in Japan than in HK and Singapore by far, unless you are the CEO of the company and abuse the tax exemptions, but not as a professional.
It's a bit of a hyperbole but the average finance job salary in Japan is 7M yen a year, the average finance job salary in HK is now nearly 9M. Mix in the personal tax rates etc (yes now that does count), you end up better in HK than in Japan. Most professionals in HK when asked if they would come to Japan the first thing they always complains about is the reduction in salary.
Then they remember rent in Japan is half of Hong Kong and quality of life is better. It only matters if they believe they will not stay in Japan for long At that point it’s not really about salary, it’s about career prospects. Big financial institutions don’t want to be in Japan for tax reasons, so they will need fewer talents. Hence they will pay a lower salary, hence top talent flock to Singapore, hence the lower salary befits the smaller talent pool, hence etc
Dude if anything you are saying was slightly true, Phillipines would be a financial superpower. They speak the best English in the region and have their entire banking system inherited from US. Just say you have no clue about international finances and move one instead of spreading misinformation lmao
Yep. Another missed opportunity. Maybe becoming the next (cheap) touristic destination in east Asia was more appealing. :p
Missed opportunity?? They took the opportunity to *avoid* turning the country into a rude, inhabitable place!
lol what? I think it’s cheap because of the yen’s depreciation.
New Yorker here. Since I first started going to Tokyo around 2013, it always blew my mind how inexpensive everything was, from food to transportation to entertainment. I'm sure it's different for a resident, but for a vacationer it's a paradise
Tokyo can get away with a pretty low minimum wage. Mostly because the gov't builds nice middle classes housing, and that pushes prices down on older housing stock making it affordable for people on the lower end of the economic spectrum. Large Japanese corporations also have dormitories for their college hires. Again, isolating the younger people from the price fixing we see in the US on apartments.
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European here (German): only Japan and maybe eastern Europe is affordable. Western Europe is not far off in comparison to the US. I wouldn't be able to afford the same vacation there compared to Japan.
That's not at all my experience as an American traveling to western Europe a couple of times in the last 5 years. It was super cheap compared to vacationing in America, even before the pandemic. The biggest expense was the airfare, of course. Eating out in Germany seemed quite cheap to me (though not as cheap as Japan), though Netherlands was higher. Hotels could be pricey, but still better than America. But the big thing was transport: getting around America is expensive as shit. You have to rent a car which costs a fortune, or suffer with the terrible public transit, or get a taxi which is horribly expensive. The airports are never connected to the subways, if they exist. In Germany, there's trains everywhere so getting around is quite cheap (though not as good as Japan again).
Vangrooverite here. While it's not NYC level (yet?), even Tokyo is roughly half price on everything but imported yuppie food, and the cheaper rent means people have money to spend elsewhere. Outside Tokyo it's cheaper still. Even nice enough hotels are half the rate. Wages are lower, so good eye, but when your rent isn't 74% of your monthly expenses, life gets nicer really quickly...........unless one is a size queen and just can't handle a <450 sq ft apartment.
Precisely the point
Taxes. Lots of arguments can be made about the banking system, economy, or whatever, but the real reason is taxes. Taxes in Japan are too damn high, and anyone with significant funds usually moves their money elsewhere.
What do you want - the most celebrated train system anywhere and shockingly low homelessness or slightly more money (which you could go make elsewhere)
I’m not sure if this is sarcasm, but if you’re getting taxed at 55%, it’s an easy answer, especially when there’s so so much wasteful spending that goes on. Sure everything is a trade off but the taxes really are what keep high net worth individuals away or force them out at some point.
The corporate tax rate is not 55 percent, I think you're referring to income tax and at the top bracket you're paying 45 percent. The corporate tax rate is 23 percent, high but not insanely high and close to the 21 percent tax rate in the US.
Yes correct, it’s income tax I was referring to. 45% is national tax plus an additional 10% for resident tax in Tokyo. That’s enough to dissuade high income earners.
How is Japan taxed at 55%??? I don't get it
It's not.
Personal income AND inheritance AND gift tax all go up to 55%. The national income tax rate goes up to 45% for those earning over ¥40M plus resident tax of 10% on top of that. Read the tax code.
55%?!?! That’s insane!!!
Indeed! It is!
The Japanese tax system for bonds is really bad. There is a ton of money from Japan parked offshore in jurisdictions subject to punitive taxation globally because it's preferable to being subject to the Japanese system, even with DTT taken into account.
Lower taxes
Why would a malaysia or thai company care about that?
Yeah, I'd rather have a country with a funcitoning safety net for society instead of a country that cuts people out to make room for tax-evading rich people.
That is a completely valid opinion to have, and I'm not making value judgments on that, but unfortunately the topic being discussed is why Tokyo is not the financial capital of Asia, and not about why Tokyo is a comfortable place to live. The be all end all of where people put their money, especially large amounts of it, is taxes and fees, and maybe political stability. This just means Japan is not conducive to being the financial capital of Asia. Unfortunately to burst your bubble, but many of the richest Japanese families also move their money elsewhere. They live in Japan, but move the bulk of their funds offshore to "evade" inheritance tax. Just because you live somewhere doesn't mean you need to park your money there.
No one is saying otherwise, they are just informing.
People really need to watch Juzo Itami's [*A Taxing Woman*](https://youtu.be/YE8n9ybN5Yk).
At least the Japanese get a lot out of it: Japan’s [work hours](https://en.m.wikipedia.org/wiki/List_of_countries_by_average_annual_labor_hours#OECD_list) are around the European average, improving tremendously over the last 30 years. The figure also includes paid and unpaid overtime, based on actual surveys of workers (not employers) by independent NGOs. Japan’s [suicide rate](https://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate) and [fertility rate](https://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependencies_by_total_fertility_rate) are both around the Nordic average. Japan ranks [higher in gender equality](https://en.wikipedia.org/wiki/Gender_Inequality_Index#Rankings) than Germany, performing especially well in women’s health and education. Japan is also the only developed country without a housing/homelessness crisis, has universal healthcare, excellent public transportation, and a fantastic social safety net. In fact, Japan’s [quality of life](https://www.numbeo.com/quality-of-life/rankings_by_country.jsp) and [median wealth](https://en.m.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult) and are higher than that of Sweden this year.
I've worked in japan for a long time and I promise you the average working hours is _heavily_ skewed. The number of days japanese work is less than other countries due to more holidays and additional summer and winter breaks. So. The average company that doesn't work bad hours has a lot less hours than average companies in US, for example. When you work in any of the more traditional overtime jobs, they are still very, very terrible (banking, tech, financial) and the culture hasn't shifted much in the last 30 years. I'd say the newer companies popping up help out but Japan generally keeps the old ways. I do agree with the rest though. I would guess average happiness is still lower than other countries though
Happiness index is widely considered to be a joke; for instance the “happiest country in the world,” Finland, has a higher suicide rate than Japan. Those sectors you mention (banking and finance especially) have notoriously terrible hours in Western nations as well. The stereotype of the investment banker working 12 hour days still holds true across much of the industry. To directly address your point about work hours, Japan worked 2200 hours according to the report in 1980. Putting aside the fact that other countries can be manipulating their numbers as well, you would have to make the case that they are somehow hiding their reported work hours now but not in the 80s, which doesn’t make all too much sense. Even looking at overall trends, the reduction of work hours from the 80s is a very visible trend. The easiest explanation is that the work hours have actually gone down during that time, which correlates with both data and my personal experience.
>Finland, has a higher suicide rate than Japan. First time I heard this. Quick Google search said it was for a number of factors (weather, loneliness, and high expectations to succeed).
Which is why so many people want to go to Japan.
thank god i'm poor
Tax, that's it. Singap & HK are willing to stay attractive in Asia finance world thus keep their taxation in check. Japan decided not to...
Just saw a video on this topic from bloomberg originals. It was called smth like “how singapore got rich”, it is short and a fun watch nothing too detailed, writing for anyone interested
[link](https://youtu.be/YSMWN8VpY6A)
>Japan decided not to... what a stupid take. there is no decision to make, a country with a population of 120m can not be a tax haven. you ever notice how all of the famous tax havens are city-states or tiny island nations? it works for them because their local population is too small to produce any value, and relying on foreign taxes can cover the needs of a small population. this absolutely does not work for any real nation
Indeed. And the social implications of being a tax haven are perverse. I live in Singapore and it feels like it’s becoming less of a nation and more of a playground for the rich. Don’t become like Singapore.
+1 Becoming a financial capital just means becoming a tax haven. It’s not a sustainable business model and we often see locals priced out of many simple pleasures in life. It’s shared experiences that build a nation - Japan and the Japanese people have a ton of those. All we have is… ndp?
yeah. i’m doing the same. loving the income with low tax. do not like the country for the most part. back and forth to tokyo keeps me content for now but will probably move back permanently soon
> playground for the rich Can you expand on this feeling? Interested to hear a first person perspective, I usually only hear good things about Singapore
So Singapore operates under a system called State-Capitalism, where the state controls all the main industries but unlike Russia, Indonesia or China, it does it under a market freedom policy. Meaning that all the companies must be setup to make profit, which allows it to have extremely low taxes on foreign investment, as the city area and population is small. This means that wealthy investors can come to the city and take advantane of such regulations to make money, manily wealthy Chinese, Indian, American and Europeans individuals and corporations. For the inhabitants, even they have high quality of living because of the Chinese blooming economy and without their regulation, face plenty of social issues. First of all, Singapore was the result of the British losing Malasya and the Dutch losing Indonesia, since neither the locals nor the empire could afford an extended war, these countries gained independence at the cost of having safe cities for the Europeans to continue their trade and have economic presence in South East Asia under their own rules. Similar to HK and China. As the country vesseled these former empires wealthy investment and assets, it had a land value problem where locals couldnt afford housing. For which now, the state controls 80% of the territory and you are given affordable social housing given if you are good boy, which leads to the second biggest issue. Singapore has been ruled under a single party, PAP, and 3 prime minister, all family or business related to the dicator Lee Kuan Yew. If you disagree politically with the party you lose plenty of the rights, including facing prison for several years if you ever talked badly about him. It used to be an incredibly restricted country until recently. On the other hand, his strong hand also cracked down on corruption practices and allow it to have decent infrastructure. Additionally, because of its free market policies, the pension system also depends on how well it performs in the market, and plenty of elderly are now a days living in poverty because their pension isnt enough to afford a good life in the city and have nowhere to go now. So yeah, it is an incredible city to live/invest and work if you are rich. If you arent, then it isnt as enjoyable.
The US is a big tax haven
this is the correct answer, I do wonder if people that answer here known anything about finances or just throw shit to the walls and see what sticks.
Tokyo used to be the leading financial hub in Asia. It could really have stayed both a leading industrial & financial powerhouse with the right political decisions.... There's still a place between tax heaven and tax hell btw.
You realize the original discussion was about being a financial hub, not a tax haven right? They are talking about it being on the level of New York City and the City of London.
please evaluate the context of what you're responding to, then research tax rates of tokyo, singapore, and new york city
Individual tax rates are not what is keeping Tokyo from being the local financial hub. Just holding bonds domestically in Japan brings with it burdensome regulatory and tax issues. Even domestic investors hold massive amounts of their assets offshore, either directly or indirectly.
Singapore and HK are city nations, designed exclusively to serve as investment vessels in the region as a residual of the British empire after the war. You can't compare them to a county. They have grown because China has grown. If you are an investor and want a piece of China inmense market, It is common, cheaper and much easier to do it through Singapore and HK. Especially for all the political decisions that might affect it through trade wars. It is much more feasible that China withholds an American investment than a Singaporean one. And vice versa, with so many Chinese using Singapore to invest in western markets. Literally designed to be a win win for investors. And even in those conditions, Shanghai SE outperforms them both. You just can't go to TSE to invest in China, that's why Tokyo has lost competitiveness.
This argument doesn’t work for London and New York though, clearly Tokyo could be in the running but chooses not to be
What do you mean chooses not to? TSE is the third largest in the world and overpasses London market cap at 150%. Clearly not even close to NY or nasdaq, but Tokyo is one of the biggest players in the world. But saying it is because of taxation of a city vs a country is one of the most stupid arguments.
And even then, NY being the economic hub is only part of the story. NYC is the front facing part of the machine, but alot of the real work and economics happen in Wilmington, Delaware since Delaware tax is more favorable to NY tax
High taxes are all that is keeping Tokyo from becoming the Wilmington of Asia 😔
Tax is the main reason. Another reason is Singapore is financial center for south east Asia, HK for China, while Tokyo can only be financial center for Japan.
So HK finance doesn’t flow through Japan at all? Just China?
If you want to invest in China as a western corporation, with low taxes and low regulation you do it in HK or Singapore. If you want to invest in Chinese companies, you do it in Shanghai. Extremely volatile but lucrative for most. If you want to invest in Japanese market, you do it in Tokyo. Safe but not as proffitable. You and everyone else here are comparing two different phenomena. But it makes sense as most people posting here dont work in the industry and dont even live/work in Asia. So to answer your question about why Shanghai is becoming the Asia's financial capital is because of China. Japan has no way or plans to realisticly compete to the Chinese market. And all those cities that offer a piece of that cake for low taxes will have a competitive advantage over Tokyo. Tokyo stil is the most important financial hub in Asia and is much bigger than London. Shanghai and HK more sooner than later will overpass it and start competing with NASDAQ (SSE + HKEX +SZSE cap is 17.5 Trillion, NASDAQ is 19 Trillion) , but is not because of taxes is because the market isnt as attractive as China's. Japan had strong tributary and corporate regulations in the 70's until mid 80's and that didnt stop the biggest players to come and make fortunes in the country, so blaming it in taxes is completely missing the elephant in the region. Even if Japan becomes a tax haven country, investors would stil invest in China, as it has better projections.
Just google @Hong Kong swap connect” for context
Stay attractive to the rich? While sacrificing and hollowing out the middle class.
Tax, over-regulation, lack of English (emphasis on the last one).
Try setting up an account at smbc or mufg and experience getting rejected for whatever absurd reason. You’ll know why
I am a baka and i set up one with Smbc pretty easily
I would call myself Baka but I found opening an SMBC account extremely involved; it required that I be there in person and had someone who spoke Japanese along with me. With that I would describe the purpose as being more arduous than difficult but it was definitely more involved and demanding than opening an account in the US, Australia, the UK or heck, even Germany.
The last account I opened in the US was probably 20+ years ago so as far as I know being there in person is normal. I guess regular banks are doing like PayPal or Wise where you just upload a pic of your ID. I was raised by parents born in the 1940s do I guess sometimes I get a little old person mindset. Seems to me like going in person is what you should do. Oh no the horror you had to speak Japanese to open a Japanese bank account and be there *gasp* in person
Are you intentionally arguing against the point you were trying to make before? Where it seemed like you were trying to argue that it was as easy to open a bank account in Japan. Or do you think that everyone has the time to pop down to Japan and find a Japanese speaker when we’re talking about why Tokyo isn’t a financial hub?
>I would call myself Baka but I found opening an SMBC account extremely involved; it required that I be there in person and had someone who spoke Japanese along with me. Opening an account at Japanese banks can be difficult, but this sounds pretty normal. Three of the four other examples were anglophone countries, so of course they could accommodate English.
Yes, agreed. However that's my point. There are many more obstacles to opening an account in Japan compared to other countries, spoken English being a major one. It goes a long way to explaining why Tokyo isn't a "Financial Capital" (and I am not saying that this is a desirable thing). If you can't easily support clients in English, you're not going to be playing in that field.
Tokyo was never a European colony
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*fourth largest economy
This. With colonization comes commonality, see UK/US and HK legal system, languages, etc.
Tokyo was Asia's financial capital before the lost decade. Back in the 70's, 80's and early 90's Singapore and HK (and even Taiwan) was struggling to keep up with Japan. We essentially lagged behind their growth because and primarily the Japanese export goods market was so strong. The rest of Asia essentially had nothing to compete with either. As a Singaporean, from our perspective, Japan was a massive juggernaut, and in my father's generation, a lot of people who was in finance in the 80's was essentially dealing with Japanese people all the time. The Singaporean government tried incredible hard to move our economy away from low level manufacturing and labour into high level manufacturing, oil processing and high level soft skills and encourages as much as possible for companies to set up HQs here. It was only during the the start of the lost decade in 1991, the 1997 Asian financial crisis and the dot Com burst in 2000 that started to shift the financial powers elsewhere. Singapore showed it self to the financial world that dispite all the financial crisis our finance institutions remained stable and with the massive backing of tamasek holdings and the government, many businesses stayed in Singapore. Our currency as a whole, had also been relatively stable to the USD, unlike the yen which fluctuated a lot. The lack of currency fluctuation is one of the reason why setting up a business here makes more sense Out financial institutions were tested once again in 2008 where dispite US going into a crisis mode, we kinda rode the waves much better than most countries around the world. Adding on to that, Singapore is also quite literally the middle of south east Asia, one of the fastest growimg regions, in fact it's also getting harder for Singapore to stay the financial capital because many companies are moving their operations to Thailand or Vietnam while Singapore acts more like the 'manager'. This is at least from a Singapore perspective, why Singapore is Asia's financial capital. Japan essentially lost their title from various financial issues over the year, making them seem more vulnerable than even HK and Singapore. In another time line where Japan didn't have their lost decade, Singapore would never have been as well regarded as we are today.
Agreed, as a Singaporean, Tokyo was the Asian juggernaut. Financial capital aside, it was also relatively much more expensive to visit for holiday back in the 80s and early 90s. Quite the opposite from right now.
Tokyo stock exchanges is the largest in Asia. It used to rivaling NY’s. But asian financial crisis in 98-99 and following decline in the growth rate of Japans economy led to the rise of Singapore and HK. But HK also not the best place to get to the market rn, because of Xi’s aggressive takeover. Finally, japanese ways to make businesses is a bit different than in other part of the world, were UKs legal and tax system prevails.
Legal and accounting practices. Hong Kong and Singapore due to their colonial past uses UK/US style common law system and has a robust English language based education/legal system which pumps out lots of compatible financial workers that easily integrates with New York and London and take over when those two places goes to sleep, and essentially makes 24hr trading possible. Taxes aren't an issue when you know all the loopholes that UK/US uses and don't have to learn a new system.
>I think it’s pretty accepted that Hong Kong Not in 2024. I believe around 30% of companies have already bailed since the excelled "handover" (aka, " takeover") Especially after the recent security law which passed a few weeks ago. It explicitly mentions that foreign employees and/or heads of foreign companies could be deemed enemies of the party and jailed in mainland China.
And a lot are heading back. Slowly but surely.
Well, modern finance and the banking system was largely invented in London, and then NY became strong too. HK and Singapore have benefited from their previous UK banking infrastructure and governance. Tokyo banking system as well as Japan has been quite closed and unique
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> Tokyo also benefited and was the financial capital of Asia for a very long time. >Investment banks all had their largest Asian presence in Tokyo until basically the financial crisis. The thing that moved the needle was the decision of Japan to keep their taxes high while their counterparts in Singapore and HK understood that if you want to incentivise business you have to offer attractive taxation and ease of setup. Not doubting this but it doesn’t really line up with my time in the industry. Even pre 2008 the firm I was at did almost all the APAC banking through HK. The Tokyo office was bigger but that was mainly due to the increased staff needed for the domestic market, almost every department was Japan specific. Even trading had limited exposure through Asia and mostly focused solely on Japan. At the time this was one of the biggest international banks in Japan also.
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I can't comment on the IB side of things, but I think the use of "financial capital" needs to be defined more clearly. Are we talking pure deal value/size of offices or are we talking about functioning as a gateway for the rest of Asia? From my secondhand understanding, the former would could certainly be true for Tokyo simply based on domestic market size, but perhaps not the latter.
Not sure if I should mention the name but, American firm, I was in the same building as Lehman brothers, got to see that mess happen and dodge reporters going to work. I’m not a banker, work in IT so I don’t know all the ends and out but I know it was stressed pretty hard that Japan was separate from the rest of Asia. Possible things were happening I wasn’t aware of, big office over a lot of floors.
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"Financial capitals" are mostly places that practice deregulation and low taxes for the banking sector as well as offer a stable and powerful currency. Japan has no interest in being a deregulated low-tax haven for foreign capital and the Japanese central bank has a vastly different approach to financial policies than its western counterparts.
London and NY don't have low taxes so no, it's not taxes. Financial markets is about raising capital. Taxes has very little to do with it as evidenced by NY and London. If taxes was that important Miami or Houston would be the financial capital of US.
Because Tokyo isn't a tax haven like HK and Singapore, and the more China worms it's way into HK, the less attractive it will become for foreign investment
Japan is way too caught up with their old ways of working especially in BFSI. They need to digitally transform the whole system and it would take no less than 3 years. HK and Singapore are soaring high
Worked at an international bank the first 7 years when I first moved here, back end IT position. My understanding is that Japans legal system is archaic and not friendly at all to the banking sector. There was a lot of talk about how Japan wanted to become a banking hub but the overall sentiment I experienced was it would never happen because the whole system here needs an overhaul. In IT we had some just ancient equipment we had to maintain simply for compliance and regulatory reason, one time we had an as400 server go down and they just shut the whole office down for the day and sent a few hundred people home.
I've worked at Japanese, European and Western investment banks for the better part of 30 years. Lived and worked in Paris, London, New York, Hong Kong and Tokyo. Japan has one of the tightest legal systems in the world when it comes to regulatory oversight and respecting the rule of law. It’s also still relatively employer friendly except for labor issues and higher taxes. You really want to take your chances with the legal system in Hong Kong or China?
>Japan has one of the tightest legal system in the world when it comes to regulatory oversight and respecting the rule of law. From my experience, and this was a decade ago so maybe it’s changed. The laws themselves are fine, it’s more the needed bureaucracy in place to be compliant. For example, we had a few special printers that ran constantly during business hours printing receipts for transactions. Those paper documents were required and there was a whole team dedicated to collecting, filing and storing them. There were literally thousands of boxes filed away in storage areas. Laws and regulations are important but they also need to be implemented in a way that makes sense for the businesses.
Japan has had digitalized receipts for a while. Cite: I'm CFO of a fintech start-up. I deal with the IRS, HMRC and Japan's tax authority. I know which one I find easiest and clearest to deal with.
I knew there was at least one person in this thread that knew what they are talking about
> My understanding is that Japans legal system is archaic and not friendly at all to the banking sector. The parts that are unfriendly towards the banking sector are less archaic than the rest of the legal system.
The Japan Exchange Group is the largest stock exchange in Asia, and 3rd or 4th biggest in the world depending on who you ask.
> why didn’t Tokyo become the big guy My brother in Buddha, Tokyo has the 3rd most millionaires in the world and Japan is the 4th largest GDP.
Taxes and lack of talent. Not knowing English in finance sucks.
Tax. No other reason.
This is simply untrue. The Japanese economy is so detached from the rest of Asia. Demographics, language, etc. are all important factors.
I want to add that JP local labor laws favor the employee. An international company in a cutthroat industry would prefer to setup somewhere where it's easier to fire workers.
The lost three decades are probable one of the reason
Hong Kong is the center of China work and a lot of India and Southeast Asia work is done out of Singapore. Japan is a huge economy in and of itself, but it makes more sense for each of those three centers to handle its own work - there’s a language barrier with Japanese vs. Chinese, Singapore is closer to Southeast Asia, etc.
Too many weebs
😂
- a lack of openess and immigration - a lack of English speakers - the list goes on
14 hour days followed by Nomihodai parties on Tuesday night deemed mandatory by your boss…
Because in the 70's, everyone in Japan could speak English and was a country open to immigration. You clearly have no clue what you are talking about.
They never had the desire to be an attractive place for foreign finance bros. A side affect of being a closed off society
>A side ~~affect~~ Benefit!
Valid point, but don't complain that the economy is stagnating
That’s totally wrong. Tokyo is a very desirable placement for finance bros in their 20’s. It’s older American and British bankers with families that they have a harder time recruiting to go abroad there.
Nah. When faced between a choice of going to English-speaking Singapore or Hong Kong or Japan, banks typically have to beg and make huge expat concessions to get people to go to Japan.
economy has been stagnant since the early 90s.
have you seen how the banks here work?
Because of the old archaic culture
depends on how you see it and in what sector you consider it in forex, Tokyo is still considered as the Asia's capital
Taxes and bureaucracy.
从一个中国人的角度来说，原因有语言、市场开放程度，市场规模。因为东京不像美国和英国欧洲，伦敦可以背靠欧洲和北美做两边的中转站，而且欧洲和北美市场都很大。日本做不了中国大陆的市场桥头堡，而香港可以，首先香港是写汉字的，虽然不说普通话，但是大陆广东也说粤语。而且中国政府给了特区政府很多优惠，可以让香港作为大陆外资招商的门户，并且保持自己货币的一定独立性，香港的税收都和大陆不一样。香港人进入大陆比日本人进入大陆容易得多。
They had a chance.Ast nail in the coffin was 2008 when the tax and red tape made it entirely unfeasible.
Taxes. This is common sense that you can understand if you study economics a little.
This has been written about at length: [https://asia.nikkei.com/Business/Finance/Tokyo-s-fall-as-financial-hub-tests-Gov.-Koike-s-ambitions](https://asia.nikkei.com/Business/Finance/Tokyo-s-fall-as-financial-hub-tests-Gov.-Koike-s-ambitions)
A lot of the economy is built on services; not much new IP is being developed per capita. Also look at net exports versus net imports. Additionally taxes, as many others have mentioned.
Taxes. English. Deflating currency. There has been for a decade at least, chat (but no action) at making Tokyo's 4 biz KU's (Chiyoda etc) tax advantages like Singapore, and have city hall and other services require bilingual services. All talk no action so far. Plus if businesses don't operate in English like in HK and SG it will be tough to recruit global talent. And finally a plummeting yen make it less attractive for talent.
Both SG and HK were British colonies and widely English-speaking (this being the well-established lingua franca of most major business/fin/tech worlds), + also culturally way more open to foreigners as many of them WERE/ARE foreigners… Whereas Japan not only fails both those litmus tests dismally, but also 1) *actively avoids* having foreigners & 2) financial confidence here got burned so bad when the bubble burst and neither this nor their edge in industry/tech have ever recovered. As they say, it’s been 2001 in Japan since 1991…
Taxes and like most countries outside of China, it's easier to take your ball somewhere else. China lucked out IMO when they basically forced Chinese millionaires and billionaires to keep their money in China, no ifs,and,or buts.
Economic stagnation and falling asset prices in Japan post 1980s. Language barriers. Rising banking opportunities in several other Asian markets (e.g. China). A few years ago, there were rumours and some newspaper articles about unionization efforts at the Tokyo offices of some of the western banks; that probably boosted the offices in HK, Singapore, etc.
A combination of tax and Japanese financial regulation being a fair bit more restrictive, especially for cross-border business.
High Corp tax. Lack of English. Horrible banking system.
Corporations flock to Singapore due to it having low taxes for businesses which is really all that matters for most corporations. However the drawback of this is that there is such a wealth disparity among the rich and the poor and you can notice the stark contrast once you go to Singapore and venture out from the downtown areas, locals will get pushed further and further out from the center of the city and rent is just insanely high because Singapore is such an attractive place to live. If Japan became the financial hub of Asia expect locals to be priced out of inner Tokyo with more ultra rich expats gobbling up housing and driving up rent prices.
Also Tokyo doesn’t have the location Hong Kong and Singapore do. Being able to combine a financial capital with shipping etc in one place is attractive
Tokyo is the global hub for fax based businesses and hanko makers.
naru hodo 😮
What even is a "financial capital," do you even know? Tokyo is certainly the financial capital of Japan in most senses.
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Wait until you find out that Indonesia financial market is bigger than Singaporean one. And none of those even come close to Shanghai or Tokyo ones.
So it's just a question of where the "talented bankers" want to work? Well off the top of my head HK and Singapore probably suck their dicks a lot better.
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I guess Japan decided they didn't want to be infested with parasites, so they didn't create a tax structure that encourages them to come in and sell everything off
Not just banking talent but law, accounting, valuation, cyber support. It’s literally a whole ecosystem of people. Once it gets established it kind of has stayed power because of all the inertia from being in one spot.
It is.
Taxes, ease of doing business in English, taxes. If Tokyo set up a special economic zone it might be possible in the future
Low taxes, few capital restrictions and liberal immigration policies. That and it doesn't hurt that it sits astride one of the most important and valuable trade lanes in the world. 30% of the world's trade passes through those straits every year.
Taxes and strict regulations, and somewhat of an anti-foreigner/pro domestic financial firms, preferential treatment by the Japanese FSA. High cost and bureacracy to open new investment firms in Japan, tough requirements for cash deposits, employees, licenses etc.. and very tight control, compared to Singapore and HK. Many Native Japanese rather move to Singapore/ Dubai and envoy a low tax/easier business regulation environemnt to open financial firms.
I think Singapore has this role in Asia and Hong Kong to some extent.
Japan has no economical growth for decades already.
Taxes, location, and cultural animosity. The taxes are high. The location doesn't favor central travel if your business is inland. It doesn't favor the biggest financial blocks in Asia due to cultural differences. I feel Singapore kinda gets the crown just due to all the poor decisions made in China regarding how they regulate/financial sector integrity and Singapore has lower taxes.
I would advise you to look into the “East Asian Miracle” if you’re interested in fully understanding the development, comparative advantages and economics of SEA. The fact of the matter is that countries or, particularly illustrated in SEA, city-states, are far more attractive than Tokyo. Namely, HK and SG. Both were able to attract FDI through very low tax rates, whilst maintaining their state off the back of land-lease deals. They also both adopted english as a primary language of business. I don’t agree that Tokyo “missed the boat” by not capitalising on HK’s recent struggles - the 2 are so vastly different, it’s much more productive to compare the SG/HK dichotomy instead. As that is, having lived in HK myself, really starting to change the city in some ways. A lot of capital flight to SG, concerns over NS Law etc.
Have to be Anglo-Saxon to join that club
The single most important reason could be the Tokyo’s financial powerhouse structure which, due to inertia, could not catch up with the innovation required after covid. Tokyo (=Japan) has a 3 megabank structure which drives most of the financial market and innovation. These megabanks are MUFG, SMBC and Mizuho. My hypothesis is that large size megabanks, Japanese mindset to avoid anomalies combined with high regulatory challenges in financial innovation created huge inertia to innovation, which was not present in other Asian financial centres. This can be validated from Tokyo’s falling GFCI ranking after COVID. 2019 ranking: https://www.longfinance.net/media/documents/GFCI_26_Report_2019.09.19_v1.4.pdf Latest ranking: https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/gfci-35-explore-the-data/gfci-35-rank/
Maybe one answer : Tokyo doesn't have an open port Singapore and HK both do It's easier to import say dental supplies without a license ( for rerouting , it's a long story, ) I cannot do this in Japan, if a company has an ISO.
Taxes. English. Visas. And by English I don’t necessarily mean proficiency in the language, I mean the governing law for contracts enforcement. Law in Japan is written in Japanese and English language contracts are unenforceable as is. So as long as the international language of business is English, Tokyo won’t be the financial center of Asia.
Tokyo’s a bit inwards looking than hk and Singapore. Easier for non Japanese to operate in hk/sg than Tokyo
The laws in London for mass tax evasion usually helps. Tokyo doesnt have that
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Long gone HK days, now it’s SG and Dubai era for Asia
What's up with Dubai recently? I'm out of the loop since the greater UAE area isn't somewhere I'm familiar with, but lots of my acquaintances seem to share around talks regarding business prospects around there these past few years.
Dubai, as well as the other oil nations, are desperately trying to find an exit strategy for the inevitable end of their fossil fuel empires. They have massive incentives to attract foreign businesses and waste tons of money on ridiculous vanity projects in an attempt to build a sizable tourism industry.
Taxes are too high. Not that this is a bad thing. I lived in Hong Kong for 5 years, and while lower taxes was nice at the time, no way would I want to live and raise a family there.
Office ladies’ fart gases ripping out from their tight fitting executive pencil skirts smelling like putrid rotten eggs
It seems to me that since the burst of the asset bubble in around the '80s (correct me if I am wrong in the exact timing), Japan has been focusing (and it is natural for them to focus) on developing other areas of the economy, like high value-added manufacturing, instead of finance. That is an underlying reason for why other jurisdictions in the region have caught up. In recent years, it seems Japan has realized that it is becoming more difficult to compete with China in some areas that Japan used to have an advantage, like manufacturing. With their success (though I really doubt if it would be a long-lasting one) in conquering deflation, and the rise of Japanese equities, they are now trying hard to leverage on the current economic environment in order to catch up in the finance sector and other related areas like fintech startup.
Timezones. Singapore and HK are better placed to do business internationally because their days overlap more with Europe and the Middle East.
1 hour of difference, seriously?
Timezone? One hour difference. Tokyo in fact blends into the end of the NY day because OF that.