ABSTRACT
Among the many challenges Japan is facing in a globalizing economic environment Tokyo’s position as a financial center both regionally and internationally has become increasingly threatened in recent years. Japan’s markets for money, capital and foreign exchange are among the biggest worldwide. But, recently, other places in Asia such as Singapore and Hong Kong have invested heavily to strengthen their competitiveness, and countries like Malaysia and Thailand-although so far on a modest scale-stand in line to follow their example. Although the turbulences of the Asian crisis have overshadowed and temporarily dampened ambitions, 1 these developments raise two related fundamental issues. On the one hand, the question is how the emergence of financial centers can be explained in general. On the other, it has to be asked how Tokyo as a financial place is affected by the various influences and which are its longer-term prospects. Will it manage to maintain its position without making major concessions to the changing international environment or will convergence and institutional adjustment be the only way to meet the growing competition from outside Japan?
