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Finding a Japanese company that runs their global treasury centre from Japan is rare. Since the turn of the century, economic conditions – as well as Japan’s geographic location – have led many Japanese companies to head overseas in search of growth and select cities in Europe as their preferred locations.
In addition, an interesting nuance of Japanese culture is that Japanese parent companies often allow their international subsidiaries to operate independently; they take a bottom-up approach wherein first decisions are managed at a local and regional level, and head office will then endorse that local decision. This is in contrast to top-down decision making which is more common in other Asian nations, such as Korea and China.
However, we are increasingly seeing companies move more towards global risk and treasury management approaches, achieving global visibility and control through centralisation.
In my experience, Japanese companies manage their treasury along three or four regional lines: Japan, Asia excluding Japan, Europe and the US.
In the past, the US hasn’t tended to be the most popular centre for treasury hubs because of the time difference with Japan which can cause difficulties in managing liquidity globally. For this reason, liquidity is often managed manually between the four regions.
London and Amsterdam have predominantly been the preferred locations for Japanese companies to establish European treasury hubs, with approximately 70% of Japanese corporates selecting London and 25% Amsterdam.
In this way, companies can implement ‘follow-the-sun’ sweeping strategies, moving funds from Asia to Europe, and then to the US, within a 24-hour cycle.
The Japanese corporates that operate in Europe – with c.60-80% of their transactions in EUR – will need to remain in Europe (including the UK) to enable them to continue managing their EUR settlement. However, Brexit coming into effect in 2019 could result in potential difficulties in managing EUR from the UK.
In fact, after the UK voted to exit the EU on 23 June 2016, many Japanese companies have already established treasury hubs in Europe, with Amsterdam coming out as the preferred location.
In my discussions with clients, they’re considering what the worst case scenario will be for Brexit; if they prepare for the worst case, and the transition/deal turns out better than expected, they won’t have to worry.
It is Barclays’ desire, and current expectation, that we will continue to support client requirements for UK bank accounts. We will also be using Barclays Bank Ireland to support the European treasury hubs of Japanese corporate clients. We continue to closely monitor Brexit negotiations and will keep you informed on the outcomes as they develop.
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