Press Conference by ASO Taro, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Tuesday, August 4, 2020, 11:08 am to 11:20 pm)

[Questions and answers:]

Q.

It has been a month since the Chinese government put a national security law into effect on June 30 to tighten its control over Hong Kong. Hong Kong is a prominent Asian financial center, so what kind of impact do you think that will have on Hong Kong and on Japan as a competing financial city? I understand that there are various environmental and other issues involved, such as low income tax rates and language, but can we get your comments on this?

A.

Over the past month we have certainly seen the phenomena that have been covered to some extent in the newspapers, and booked-up flights from Hong Kong to Taiwan are obviously one apparent impact, but at the same time money has been pouring into Hong Kong from various sources so, while people might extrapolate after only one month how things might go in future, I would caution that the financial world is not so simplistic. New York, London and Hong Kong are roughly eight hours apart, and this pattern allows for a seamless 24-hour market, so I do believe that Hong Kong has had considerable value as an Asian market and a financial hub. It is only natural that, if Hong Kong is deemed too risky, market participants may begin looking to move elsewhere such as Japan or Singapore. As was recently noted in the government’s Basic Policy on Economic and Fiscal Management and Reform, Japan is quite prepared to take steps aimed at making Japan a financial hub, and this is a stance that we need to embrace. It might be quite difficult to accomplish this unless we make major changes, however. From the perspective of finance, although Japan is still called a trading nation by some newspapers, this may no longer be the case, as exports make up only a low percentage of GDP, about 16% to 17%. This really is not such a large percentage. Net financial revenues – funds invested by Japan overseas, patent fees, dividends and so on – like other inflows of Gross National Income, or GNI, are getting bigger at the moment. In other words, finance has become a bigger factor in Japan’s balance of payments. As Japan undergoes significant transformation in these times, it will need to consider its know-how and approaches with respect to finance. I think this is the direction in which the times are moving. If it proves difficult to make this work in Tokyo, we could try Osaka or Fukuoka instead. These locations are even closer to Asia, and using them would avoid an overconcentration in Tokyo. I feel this is an area to which we will be giving much thought for a number of reasons, but we cannot tell how things will turn out after only one month.