ABSTRACT
The business of the foreign bank in Japan is wholesale-oriented and is controlled by the following regulatory constraints. Medium-term foreign currency lendings to major Japanese corporations in Japan with interest being quoted and charged as a margin over the London Inter Bank Offer Rate. In view of Japan’s concentration on exports foreign banks in Japan are much more involved in advising and confirming letters of credit opened through them by other branches of their bank, group members or foreign correspondent banks than they are in establishing letters of credit in favour of foreign beneficiaries. With Japan’s projected slower growth, foreign banks must look to alternative ways of servicing Japanese corporations. Foreign banks which have set up fully-fledged dealing operations as opposed to foreign exchange covering/funding departments are becoming a significant force in the market but the Bank of Tokyo, as the only authorised specialised foreign exchange bank in Japan, maintains an almost monopolistic hold on the Japanese foreign exchange market.
