Within Asia, Hong Kong and Singapore have dominated the headlines as the financial hub of choice in the region. Outside of the spotlight, Tokyo is catching up.

From family offices to financial technology and beyond, Hong Kong and Singapore have been oft-touted as the leading financial hubs in Asia. They both have various advantages, most notably their linkages to relatively fast-growing economies in mainland China and Southeast Asia. 

Although Tokyo has no such connection, it has been making noise as a newly emerging rival.

Financial Center Ambitions

Political leaders in Japan have made it no secret that they want to enter the conversation as an international financial center. During a US visit in September 2023, Prime Minister Fumio Kishida spoke about reforming the country’s asset management industry to lure new players. This includes lowering barriers to entry, deregulation and the establishment of business zones with administrative procedures that can be completed solely in English.

«The development of Japan's asset management business, leveraging more than 2,000 trillion yen ($12.7 trillion) of personal financial assets, will help bolster the flow of investment,» Kishida said in a speech at the Economic Club of New York. 

Kishida reiterated such ambitions this month at a Morgan Stanley conference, noting that Tokyo, Osaka, Fukuoka and Sapporo have submitted proposals to potentially become special business zones. 

«Catching Up»

Even major global financial institutions are taking notice. Morgan Stanley’s Asia CEO Gokul Laroia said in a «Bloomberg» report there was «no question» that Tokyo is «catching up» as a financial hub compared to Singapore and Hong Kong.

Laroia added that the Bank of Japan’s historic monetary policy shift could lead to a transition of household assets from bank deposits to financial instruments which could potentially form a «very large» asset management industry.

Quantitative Progress

There are some qualitative indicators of progress in Tokyo’s reemergence as a financial hub. According to Kishida’s September 2023 speech, funds in Japan's asset management sector grew 50 percent over the last three years to reach 800 trillion yen. 

In March 2024, a semi-annual index co-produced by Shenzhen-based China Development Institute and London-based Z/Yen Partners noted that Tokyo increased its ranking from being the 20th to 19th top financial center globally. In comparison, Singapore and Hong Kong were in the third and fourth rank, respectively.

«Tokyo will be a preeminent, revitalized global financial center when — over time — the sum of its virtues entices more global corporations and citizens to vote with their feet and call Japan home,» said Mark Siege, an adjunct fellow at Hudson Institute, in a February commentary. «That is how this can play out, and this is the moment to take some substantial steps.»