"Need to Boost Competitiveness"... Why Japanese Telecom Companies and Regional Banks Focused on Suga's Words

Yoshihide Suga, Chief Cabinet Secretary of Japan
Photo by Reuters

[Asia Economy Reporter Jeong Hyeon-jin] The eyes of Japanese telecommunications companies and regional banks are focused on Chief Cabinet Secretary Suga Yoshihide, who is the leading candidate to succeed Prime Minister Abe Shinzo. This is because he emphasized strengthening the competitiveness of these two industries and demanded changes immediately after declaring his candidacy for the Liberal Democratic Party presidential election. There is growing anxiety in the industries that if he comes to power as prime minister, policies that could harm them will be unleashed.

According to the Nihon Keizai Shimbun on the 6th, at a press conference on the 2nd announcing his candidacy, Minister Suga stated regarding mobile phone charges in the telecommunications industry, "I will make the structure where competition among operators works more thorough," and pledged to lower fees. This remark took into account that among the world's six major cities, Tokyo ranks second highest in standard mobile phone plans after New York.

Minister Suga has shown interest in reducing telecommunications fees during the second Abe Cabinet. In 2018, he said, "There is room to reduce Japan's mobile phone fees by about 40%," starting pressure on telecom companies. At that time, telecom companies launched cheaper plans. Also, from October last year, regulations were introduced to separate telecommunications fees from device payments.

The Nihon Keizai Shimbun reported, "Minister Suga viewed the price reductions by the three telecom companies as insufficient," and "Although the fourth telecom company, Rakuten, joined in April, the price reduction moves by the three companies were sluggish."

The Japanese telecommunications industry is highly concerned. Especially because they believe that if Minister Suga becomes prime minister, lowering mobile phone fees will be inevitable. A telecom executive who watched Suga's candidacy press conference on TV was reportedly shocked by his remarks and said, "I wish he wouldn't say such things in places like this," according to the Nihon Keizai Shimbun. An executive at NTT Docomo said, "Although it was said that the profit margin is high at 20%, there are other companies like that," and a SoftBank official said, "Price reductions will drain the strength needed for 5G investments."

As a result, telecom stocks are also fluctuating. On the 31st of last month, when media reports about Minister Suga's candidacy emerged, Docomo's stock price fell by 3%, and KDDI and SoftBank stocks dropped by 5% and 3%, respectively. The market also evaluated that "Suga's inauguration as prime minister is the worst-case scenario for large telecom companies," according to the Nihon Keizai Shimbun.

Inside a Japanese bank [Image source=Reuters Yonhap News]

Regional banks are also closely watching whether Minister Suga will be elected. On the day he declared his candidacy, Suga remarked, "Aren't there too many regional banks?" and at a regular briefing the next day on the 3rd, he hinted at the possibility of restructuring regional banks. Minister Suga has expressed the opinion that strengthening the competitiveness of regional banks is necessary, considering that the prolonged low interest rates along with the Bank of Japan (BOJ)'s monetary easing policy have severely deteriorated the profitability of regional financial institutions, and that the regional population is declining due to low birthrates and aging.

Accordingly, on the 3rd, he mentioned the special exemption law excluding the application of the Antimonopoly Act to mergers of regional banks, which was enacted in May and will be implemented within the year, saying, "They need to carry out management reforms themselves, strengthen their management base, and contribute to the region." According to this law, mergers between regional banks within the same prefecture are allowed despite creating oligopolistic situations.

Immediately after Minister Suga's announcement, stock prices of regional banks surged on the Japanese stock market, and SBI Holdings' stock price also rose significantly. SBI Holdings is planning and promoting a 'Regional Bank Alliance' that provides integrated support for systems and market operations in cooperation with several regional banks. SBI's President Yoshitaka Kitao also revealed at a lecture on the 2nd that they are close to agreements with three to four banks.

This content was produced with the assistance of AI translation services.