Flush With Cash, Japanese Seek Acquisitions Abroad

The Japanese have long been a center for worldwide manufacturing, but with other economies reeling, the Japanese have stepped increasingly into the financial sector, according to The Wall Street Journal.

Japanese firms have stepped-up their foreign operations this year, with acquisitions thus far in 2008 already outstripping those made in all of 2007. One of Japan’s largest companies – Mitsubishi UFJ, of Mitsubishi Group – finalized its acquisition of a 21 percent stake in Morgan Stanley for $9 billion. Nomura Holdings, Japan’s largest brokerage firm, purchased the overseas operations of bankrupt Lehman Brothers Holdings for a relatively inexpensive $225 million. Lehman Brothers had been so shaken by the American financial crisis that the acquisition was priced perhaps 90 percent lower than it would have been one year ago.

Japanese companies are expected to be very active in purchasing assets from American International Group in coming weeks. As part of its $85 billion government bailout, AIG must repay the bridge loan through the sale of assets.

Japanese firms are now reaping the benefits of a renewed drive toward fiscal responsibility on the part of their government. The Japanese economy has also benefited greatly from American irresponsibility over the past decade, accumulating massive current account and trade surpluses by funding U.S. government debt and producing a large portion of American consumption goods.

Unlike their counterparts in the U.S., Japanese banks have few problems with “liquidity.” They seem to have plenty of “liquid assets” (i.e. cash on hand), while U.S. companies are increasingly strapped for cash. This is due to the nature of the Japanese population. The Japanese have some of the highest personal savings rates and household savings rates in the world – the U.S. has one of the lowest – meaning its population keeps more of its money in commercial banks than any other nation.

This gives Japanese commercial banks and finance houses a leg up on their competition, while also giving them plenty of available funding to make big purchases. With its 21 percent holding of Morgan Stanley, Mitsubishi Group now has a retail banking and commercial asset management group which could begin to rival American juggernauts like Citigroup, Bank of America and JPMorgan Chase and Co.

American companies are selling to overseas bidders at an alarming rate, and the Japanese have displayed a keen interest in expanding their already massive U.S. operations. With the economic crisis completely undermining once profitable U.S. companies, there is little that can be done to stem the tide.

Source The Wall Street Journal:

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