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Firms Urged to Position for Japanese Market


Even though it has not been determined how contributions to the Japanese version of 401(k) plans will be taxed, U.S. companies interested in taking advantage of the imminent introduction of the plans in Japan should be forming alliances now, according to participants at a recent conference in Tokyo.

The Japanese Diet is still working out the tax implications of Japan's planned introduction of its version of 401(k) savings plans in the fall of 2000, according to Yuji Tushima, a Liberal Democratic Party member of Japan's House of Representatives. Tushima, chairman of the Diet's subcommittee on private annuities, spoke at a gathering of mutual fund executives Dec. 8.

Called the Japan-USA Asset Management Forum, the meeting was co-sponsored by The National Investment Company Service Association (NICSA) of Wellesley, Mass. and the Kinzai Institute for Financial Affairs of Tokyo. The institute provides research and educational activities for Japan's financial industry. Speakers, who represented both U.S. and Japanese companies, outlined how the American 401(k) market has developed and the potential for Japan's estimated $13 trillion overall mutual fund industry.

Until the Japanese Diet determines how its version of 401(k) plans will be taxed, it will be difficult for Japanese and American mutual fund companies to develop strategic plans for the Japanese retirement market, said Robert Goldberg, president of NICSA, in a telephone interview following the conference.

"It is not an easy market to define at this point because nobody knows the rules," Goldberg said. "These will get defined as we go forward and people will respond accordingly." In the meanwhile, "a lot of strategic partnership and consortiums are being worked up," he said.

Now is a good time for American companies to enter into partnerships with Japanese mutual fund, bank and insurance companies because these entities know it will be a big business and "they are desperate for the knowledge," Goldberg said. The Japanese media is covering daily what it is calling an impending crisis in retirement, he said.

To succeed in the Japanese market, fund companies should focus on participant education, said Donna Morris, executive vice president and branch manager for Fidelity Brokerage Services (Japan) LLC of Tokyo. Even though the Japanese are currently not very knowledgeable about investing, fund companies entering the Japanese market that have met the high expectations of today's U.S. investor should emulate their domestic models, Morris said.

One of the major factors that has made American fund companies so successful in marketing product is that they have encouraged participants to take charge of their accounts, Morris said.

"Accuracy and timeliness are top priorities," for plan participants, Morris said. "Help participants access information when and how they want. Communication and education is a key driver to the development of the retirement investor."

Fund companies will be able to, "guide [Japanese] participants from being savers to investors," she said.

However, studies show that very few Japanese currently are thinking about retirement in spite of the heavy attention the media is devoting to the subject, said Patrick Kawasjee, president and managing director of SSB Citi Asset Management Co., Ltd. Retirement is a primary concern for only 12 percent of people in their twenties, 20 percent of people in their thirties, 40 percent of people in their forties and 70 percent of people in their fifties, Kawasjee said.

This was NICSA's first meeting in Japan. The organization is planning to hold a second meeting in conjunction with events to be held July 12 and 13 in Tokyo in commemoration of the 50th anniversary of the Kinzai Institute.