Tokyo's New Move to Become a Global Financial City Through Greening and Digitalization

Where is Tokyo headed after COVID-19? This article will explore the true meaning behind the future envisioned by the Tokyo Metropolitan Government (TMG), which has set out a plan to lead the economies of Japan and the world by transforming into a global financial city.

A Fresh Start for a New Tokyo

The COVID-19 pandemic has caused unprecedented economic devastation around the world. Today, cities all over the globe are facing the pressing issue of how they will recover and what kind of society they will build for the future that is to come.

The answer TMG has given is a "sustainable recovery." The government has expressed its determination to promote the COVID-19 recovery under the slogan "Re StaRT", not simply aiming for a return to pre-COVID society, but to realize a resilient and sustainable society brimming with diversity and inclusiveness, the legacy of the Tokyo 2020 Games, while flexibly responding to changes in people's values and society.

Rebuilding the economy is positioned as an important issue in particular. Expectations here are pinned on TMG's "Global Financial City: Tokyo" vision. The vision is a strategy to promote Tokyo's growth by revitalizing the financial sector based on the fact that finance accounts for approximately 10% of the city's GDP and has broad ripple effects on other industries. Originally announced in November 2017, it has since been revised in light of situational changes in Europe and Asia as well as in the global environment surrounding international finance, and, looking toward the post-COVID world, Vision 2.0 was announced in November 2021.

The Green x Digital Revitalization of Finance

The "Global Financial City: Tokyo" Vision 2.0 outlines its specific measures split into three major pillars. "Green" and "digital" are two main keywords in particular.

  • Establishment of a robust financial market that helps solve social issues (Promotion of the "Tokyo Green Finance Initiative")
  • Digitalization of finance through the utilization of FinTech, etc.
  • Accumulation of asset managers and other diverse financial players

- Promotion of Green Finance

Addressing the climate crisis is one of the most important challenges the world is facing today. As governments around the world have announced policies to drastically reduce CO2 and other greenhouse gas emissions, TMG sees environmental initiatives as a growth investment rather than a cost, and has already begun taking action to achieve "Carbon Half*" by 2030 and a "Zero Emission Tokyo**" by 2050.

In the midst of this trend toward decarbonization, investors and markets are now increasingly coming to regard corporate environmental initiatives as an important criterion for their investment decisions. This shift, which includes ESG investment, is having a ripple effect on corporations, many having already begun to steer their management policies in a more environmentally friendly direction.

However, environmental initiatives require large amounts of capital. In response, TMG will actively support the development of Tokyo's green finance market by developing an information platform focused on corporate ESG initiatives and supporting the costs of external reviews for, among others, issuers of green bonds, such as companies and organizations.

TMG will also strengthen its efforts to revitalize sustainable finance for SMEs, attract individual investors, disseminate decarbonization measures and technologies overseas, and attract and nurture highly skilled human resources who will be responsible for sustainable finance. Through these efforts, the city aims to establish a robust financial market that is attractive to investors, corporations, and financial institutions around the world while creating a virtuous cycle between the environment and the economy in order to transform Tokyo into a green city that is recognized as such by the rest of the world.

- Financial Digitalization

Technology continues to make remarkable progress, and the waves of digital transformation sweep through every aspect of people's lives. The same is true for the world of finance. The digitalization of finance is a pressing issue, from improving the convenience of financial services to creating attractive new digital financial services and more.

On the other hand, it is also evident that there is much room for improvement in Japan's digitalization of finance. In light of this, the newly revised Vision 2.0 sets forth support for the attraction, establishment, and growth of FinTech companies, and aims to promote the digitalization of fund intermediaries and cashless payments. This stance is meant to provide a strong backing for DX (Digital transformation) in the financial market.

Specifically, the plan includes support for the initial costs of FinTech companies setting up operations in Tokyo, creating new services through TMG-invested funds, and developing measures to increase the ratio of cashless payments within the city.

Should the accelerated digitalization of finance expand the financial market, many new opportunities will surely be created for companies and individuals seeking to develop their financial businesses in Tokyo.

- Accumulation of Diverse Finance-Related Players

Highly knowledgeable and skilled financial professionals and companies are indispensable in order to revitalize the financial industry and raise Tokyo up to the status of a global financial city. TMG will promote the attraction of asset managers and other investors from around the world to Tokyo by creating an attractive business and living environment, which will include requests to the national government to review taxation and other regulations.

In addition to supporting the establishment and growth of new businesses through a program to foster emerging asset managers, TMG also aims to develop a broad range of financial talent through a program to nurture highly skilled professionals in collaboration with universities. Moreover, it will hold seminars and other events to improve the financial literacy of Tokyo residents so that they can properly utilize their personal assets.

This accumulation of financial players is expected to further improve the city's attractiveness as a place to invest and raise funds.

Through these above three pillars, it is anticipated that Vision 2.0 will become a powerful driving force for revitalizing Tokyo's financial markets and promoting its growth.

The Global Financial City that Tokyo Aims to Be

To begin with, Japan is an economic powerhouse with the world's third-highest GDP and an enormous volume of personal financial assets approaching ¥2 quadrillion, representing a huge business opportunity for the financial industry. Tokyo, Japan's capital, acts as the center not only of government but of the economy, culture, and all other aspects.

That is not all. Japan is a nation based on the rule of law, liberalism, and democracy—foundations shared with the West—and its safety is universally recognized. The ability to make stable financial transactions is a major advantage of doing business in Tokyo, and is one of the city's major strengths.

With Asia now one of the world's most important "poles" alongside the United States and Europe, Tokyo possesses a high level of overall strength as a top city of the region.

As such, Tokyo has ample potential to become a world-leading global financial city, linking funds from around the world to the demand for funds at home and abroad. Vision 2.0 aims to leverage these advantages to make the "Global Financial City: Tokyo" a reality.

What the "Global Financial City: Tokyo" Will Bring to the World

What, then, will realizing the "Global Financial City: Tokyo" bring to the world?

As a place where it is easy to raise funds and invest, and where stable financial transactions are made possible, the "Global Financial City: Tokyo" has all kinds of potential advantages for companies and other seekers of funds, investors and other suppliers of funds, and financial corporations around the world.

Tokyo will undergo a transformation moving forward, as a new destination for investment post-COVID or as a base for businesses to spread their wings out into the world. All eyes will be on the results of Vision 2.0.

And Where Is Tokyo Headed?

Greening and digitalization, cornerstones of Vision 2.0, are key issues facing the post-COVID world. Recognizing this, TMG is determined to take even more aggressive and bold action toward realizing the "Global Financial City: Tokyo."

Nakaso Hiroshi, Chairman of The Organization of Global Financial City Tokyo (FinCity.Tokyo), has this to say.

" Now we do not want the revival of a financial center that just boosts its size. Rather, our goal is to upgrade Tokyo as a financial center that can help resolve Japan's social and economic challenges through effective utilization of household assets which amounts to almost 18 trillion dollars, and that brings Japan's economy back on track to sustain growth... Tokyo tends to be a financial center that connects domestic and global investors with the industrial sector's huge financing demand to meet the challenges in the post-COVID world."(from the TMC Talk "Revision for the "Global Financial City: Tokyo" Vision")

Tokyo has taken a new step as a financial hub in Asia toward becoming a city that contributes to the establishment of a global investment chain that links domestic and international capital demand to worldwide capital supply, and one that is highly attractive to global investors, companies looking to raise funds, and financial institutions.

* Carbon Half is a statement made at the Davos Agenda Meeting on January 27, 2021, that Tokyo will reduce greenhouse gas emissions by 50 percent from 2000 levels and increase the usage of energy-saving electricity to 50 percent by 2030.

** Zero Emission Tokyo defines Tokyo as a city that contributes to the world's net-zero carbon emissions by 2050. TMG announced the "Zero Emission Tokyo Strategy" in December of 2019 to make it come true. TMG will implement measures to mitigate and prevent global warming and to adapt to already observed impacts of global warming. In addition, TMG will address challenges in all areas deriving from urban activities, including supply chain activities.

"Global Financial City: Tokyo" Vision 2.0

Written by Ajiro Natsuko / Translated by Amitt