Internationalization of Japanese Commercial Banking and the Yen: The Recent Experience of City Banks**I would like to express my deep appreciation for Professor Kazuya Mizushima, Professor Ryoichi Mikitani, and Professor Kenichi Ishigaki. These professors are my closest colleagues at Kobe University.The members of our research group are Professor M. Fujita, Kobe University, Professor K. Mizushima, Kobe University, Professor R. Mikitani, Kobe University, Professor Y. Futatsugi, Kobe University, Professor N. Miyata, Kagawa University, Professor K. Ishigaki, Kobe University, Associate Professor N. Niwa, Toyama University, Associate Professor K. Shimomura, Kobe University, and Assistant H. Izawa, Kobe University. Moreover, all these members belong to the Special Research Committee of International Finance, Kobe University, and Professor Fujita serves as the chief of that committee. We would like to particularly acknowledge the work of Mr. Miyata, Mr. Ishigaki, Mr. Niwa, and Mr. Izawa as members of our most important working group.The following banks cooperated in our research. City banks: Daiichi Kangyo, Daiwa, Fuji, Hokkaido-Takushoku, Kyowa, Mitsubishi, Mitsui, Sanwa, Sumitomo, Taiyo-Kobe, Tokai, and Tokyo; Nihon Saiken Shinyo, Japan Export Import Bank, and some regional banks; Hokuriku, Yokohama, and some stock companies; Nomura, Nikko, Yamaichi, Daiwa, and many life insurance companies; Nihon Seimei, Dai-ichi Seimei, Meiji Seimei. We would like to express our appreciation for their kindly cooperation.Furthermore, we would like to acknowledge the financial support provided by Grants in Aid for Scientific Research, the Ministry of Education, and Nihon-Shoken-Shogaku-Zaidan (Japan Securities Scholarship Foundation).The subject of this paper is Internationalization of Japanese commercial banking—the recent experience of city banks in Japan. This is a summary of the results of the questionnaire-based research work that we conducted twice, once in 1977–78 and once in 1981–82. We have been working very closely since the questionnaires were drafted in compiling the responses and in discussing the summary of the results and its interpretation. Therefore this project is really a 'joint product' of our cooperation, and the computation of each member's contribution to this project is very difficult to assess.The actual writing of the summary has been done by our working group—Professor Fujita, Professor Mizushima, Professor Mikitani, and especially Mr. Miyata, Mr. Ishigaki, Mr. Niwa, and Mr. Izawa. The other working members were Professor Yusaku Futatsugi, Professor Nobuo Miyata, and Assistant Hideki Izawa. They could not attend our Canberra seminar at Australian National University in October, 1983, but other members (Mr. Fujita, Mr. Migustima, Mr. Mikitani, Mr. Ishigaki, and Mr. Niwa) could attend, and we were very happy to have fruitful academic discussions

Publisher Summary The chapter discusses the internationalization of Japanese commercial banking and the yen. The internationalization of finance has three aspects. First, it involves the internationalization of domestic currency, that is, a domestic currency also becomes an international vehicle of currency and a reserve currency. Second, it involves the internationalization of banks and other financial institutions, that is, they make transactions in both domestic and foreign currencies with nonresidents and residents. Third, it involves the internationalization of money and capital markets, that is, both short-term and long-term funds move freely into and out of the markets across the borders of the countries and interest rates are determined by market forces. There are two main courses in the internationalization of banking: 1) banks may internationalize themselves in accordance with internationalization of their domestic business customers or 2) banks may initiate internationalization on their own. There are two types of limitations in the process of internationalization of banking—internal and external. Internal limitations are basically management problems, while external limitations arise from general economic conditions and various regulations imposed on banks. According to the survey, the main internal limitations as perceived by the banks are, in order of importance, the shortage of competent staff to carry out internationalization, the inability to collect adequate information and know-how, the lack of an adequate system of operations for internationalized banking business, and the cost of establishing foreign bases such as branches, representative offices, and local banks.