Unexpected global slowdown may impact EM investments: Masato Miyachi, MUFG Bank

How will Japan’s shrinking economy impact emerging markets like India?
There has been no change in the international situation surrounding the Japanese economy. The...sense of uncertainty remains unchanged around issues such as the US-China confrontation. There is a need for continued vigilance against the risk of the economy weakening on a decline in corporate hiring or investment demand, or a reduction in consumer spending. An unexpected slowdown in the global economy or a rise in the value of the yen...may cause some changes in overall emerging market investments.

How has the India-Japan business corridor translated into business for Japanese banks such as yours?
The Japanese government is working closely with the Indian government across key infrastructure development projects. The Delhi Mumbai Industrial Corridor (DMIC) — a $100 billion project — being developed by both governments is a great example. The Chennai-Bengaluru Industrial corridor is also modelled on the same lines. Since we have a strong presence in both cities...we expect to benefit in the long run from the development of these corridors.

MUFG started business in India in 1894. Why has it not grown despite the country growing at a fast clip for nearly 25 years?
This is not entirely true. In fact, since early 2000s, we have significantly expanded our coverage of Asia and particularly India. We have been dominating this area for three consecutive years and have been in the top 5 of India’s G3 bonds (sales of bonds in US dollars, euros and the yen) league table. Similarly, we are currently ranked number two in India’s foreign currency syndicated loan bookrunner league table.

What is MUFG’s strength that can help it grow here?
We have scaled to... being the fifth-largest global bank in terms of assets. We leverage our global credentials...for Indian clients. For example, we have been the number one in project finance globally for eight consecutive years. This means, we bring abundant experience, a credible track record and expertise and understanding of infrastructure financing to our clients.

The total Indo-Japanese trade is worth just about $20 billion. What is holding it back?
Japanese companies focused their investments on China and the ASEAN region for a couple of decades. These markets are gradually becoming mature. I think this will compel Japanese companies to look at India with renewed interest for diversification. In a survey of Japanese corporations, India has emerged as the most promising country, both in the medium three-year horizon and long term 10-year horizon.

Japan is the third largest FDI investor in the country, but that is still less compared to your size and ability. Why?
Between 2000 and 2019, the investments into India — around $30 billion — have mainly been in automobile, electrical equipment, telecommunications, chemical, financial services (insurance) and healthcare sectors. Japanese companies are now partnering with the Indian government in several projects — including key areas like infrastructure, fintech and energy. Japan has also been collaborating by jointly endorsing the “Make in India” initiative by organizing promotional activities in Japan.

Will Japan help local startups?
JETRO (the Japan External Trade Organisation) is encouraging Indian startups, and the first startup hub has been set up in Bengaluru. The idea is to help Japanese corporates identify suitable investment opportunities from the Indian startup space. Besides, there are other collaborative associations...that should encourage startup innovations.

How can local manufacturers benefit from Japan in terms of skills?
Japan is known for its industrial management techniques. It is now passing on the knowledge via Japan India Institutes of Manufacturing (JIM) to train future shop floor leaders in Japanese style manufacturing processes and Japanese Endowed Courses (JEC) in select engineering colleges for training middle management engineers in the manufacturing sector.

US banks and European banks are still dominant despite their troubles. What prevents Japanese banks from capitalising as they shrink?
We are one Asian global bank that has filled the space vacated by US and European banks, which, in turn, are focusing on their domestic markets. This is somewhat less highlighted in the market as we don’t do retail business. MUFG is the biggest investor in the inorganic banking market in Asia. Though we also look at India for inorganic opportunities, we have not identified any targets yet.