As Japanese Companies Increase Inventory... Mitsubishi UFJ Becomes First Among Japan's Top 3 Banks to Start Inventory Purchase Business
[Asia Economy Reporter Jeong Hyunjin] As Japanese companies that experienced a global supply chain crisis expanded their inventories, Mitsubishi UFJ Bank is starting a business to purchase corporate inventory, becoming the first among Japan's three major megabanks to do so.
According to the Nihon Keizai Shimbun on the 6th, Mitsubishi UFJ has established a subsidiary called 'MUFG Trading' to temporarily purchase corporate inventory through this company. When a company signs a procurement contract with a raw material seller, this company holds the inventory on behalf of the company and returns the inventory when the company needs it.
The reason Mitsubishi UFJ started this business is due to the expansion of inventory by Japanese companies amid ongoing supply chain disruptions. Japanese companies that experienced the supply chain crisis began stockpiling raw materials, increasing financial burdens. Typically, the inventory level of Japanese manufacturers is between 0.5 to 2.5 months, and the total inventory scale of Japanese companies is reported to be about 120 trillion yen (approximately 1,160 trillion won).
The Nihon Keizai Shimbun reported that Japanese companies have traditionally managed their operations to minimize inventory to improve production efficiency, but this year, due to China's lockdown policies caused by COVID-19, logistics difficulties have strengthened the movement to secure inventory.
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Mitsubishi UFJ expects transactions worth 500 billion yen over several years. MUFG Trading earns profits from the difference between the inventory purchase amount and the repurchase amount. This business is already conducted by Citibank and Macquarie in the United States. In Japan, following the enforcement of the revised Banking Act last year, banks' subsidiaries are now allowed to hold clients' inventory, enabling this business to emerge, explained the Nihon Keizai Shimbun.
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