Notes on Japan 1982-1986

Through the entire years of 1983, 1984, and 1985 I was Consumer Services Group Business Manager for Citicorp based in Tokyo. My primary responsibility as CSG Business Manager was as CEO of Citicorp Credit KK, (CCKK) a Tokyo based consumer finance company subsidiary of Citicorp with offices in Tokyo, Nagoya, Osaka and Sapporo.

Citicorp Credit K.K. was a de-novo start up by Citicorp in1978. Japan’s consumer credit market at that time was dominated by domestic players, especially the sarakin (unsecured personal loan companies) and sales finance firms. Strict regulations, cultural attitudes toward debt, and barriers to foreign entry limited outside participation. Most foreign banks focused on corporate, trade, or wholesale banking rather than retail consumer lending. Assessing that Japan's consumer finance business was underregulated and usurious, The Bank of Japan gave permission to foreign owned businesses to open up consumer finance subsidiaries. It was under this aegis that Citicorp started CCKK in 1978.

CCKK was active in Japan, particularly from the late 1970s through the 1980s and beyond. CCKK introduced more accessible, American-style consumer credit products (installment loans, etc.) to middle-class Japanese consumers at a time when such banking products were unavailable. CCKK fit into Citicorp’s broader push into retail/consumer banking in Japan during the 1970s–1980s, alongside other subsidiaries in areas like credit cards, data processing, and software.

My assignment to Japan was principally as a trouble shooter. During the first four years of its opening, CCKK experienced significant losses. There were no credit bureaus in Japan and assessing credit risk of potential borrowers was difficult. At the time of my arrival in 1982, CCKK wrote off some $20MM of bad debt. We spent from 1982 taking on loans with improved credit risk assessment, many of them loans to finance golf course memberships. By the time I left Japan in late 1985 CCKK had become a moneymaker.

While in Japan I started a project to purchase a Japanese Bank. With the approbation of Citi senior management (Ed Harshfield and John Reed), i hired Bain Capital (Walter Ames) to assist. We started looking at Sogo banks. Sogo banks were a category of Japanese banks established under the Sogo Bank Law of 1951. They operated as joint-stock companies focused primarily on serving small and medium-sized enterprises (SMEs), local businesses, and individuals in regional areas, often functioning similarly to mutual savings banks or cooperative-style institutions.

I was reassigned from Japan to the US mid bank acquisition project but after my departure, Citigroup did not purchase a Sogo Bank or any other bank entity to facilitate the expansion of consumer lending business.

While in Japan, I wrote down notes and kept them in a small binder. These notes are reproduced here: