Generating High Interest in Saitama’s Future

To begin, I would like to discuss the current state of Saitama Prefecture. Geographically, Saitama occupies a highly strategic position adjacent to the Tokyo metropolitan area; it serves as both a hub for diverse manufacturing industries and a major residential area for a large population. How do you assess the prefecture's current demographics, economic trends, and industrial structure? Furthermore, what are the primary challenges you are currently facing? Specifically, with the declining birthrate and aging population progressing nationwide, what is the situation here in Saitama? Finally, in terms of industry, which sectors are your strongest?

Currently, Saitama Prefecture holds the fifth-largest population among Japan's 47 prefectures, with approximately 7.32 million residents. While Japan’s overall population has been declining since the 2010s, Saitama continued to see growth until 2022. Although we have since shifted to a slight downward trend, the rate of decline is extremely gradual at just 0.2%. Therefore, at this stage, Saitama is keeping the impacts of rapid national population decline and aging relatively in check.

When looking at specific regions within the prefecture, we see a 'social increase' in population—meaning net migration—in the designated city of Saitama City and the southern areas adjacent to Tokyo. Compared to central Tokyo, these areas offer more green space and a highly attractive living environment. Furthermore, the presence of numerous industries within the prefecture allows for a 'proximity of work and home,' which contributes to a higher quality of life. Given our adjacency to Tokyo, educational standards are also high, and Saitama City consistently ranks near the top of 'Desirable Places to Live' surveys. It is true that the population is decreasing slightly, but this should be viewed as a manifestation of gradual aging rather than a sudden drop. However, looking toward 2050, the population of elderly citizens aged 75 and over is projected to exceed 1.5 million. Conversely, the working-age population is expected to decrease by approximately 800,000—a 20% drop—which will significantly impact the prefecture's demographic composition and labor structure.

In terms of economic scale, Saitama’s Gross Prefectural Product stands at approximately 23.7 trillion yen, ranking fifth nationally. This is because we are a corner of the 'Capital Region Economy'—comprising Tokyo and six surrounding prefectures. This zone concentrates about one-third of Japan’s population, or roughly 40 million people, and features advanced industrial clusters. Geographically, the area has many stable plateaus and robust transportation infrastructure, such as expressways and railways, making it highly suitable for corporate locations.

Regarding industrial structure, manufacturing accounts for the largest share, followed by real estate. A defining characteristic of Saitama’s economy is the overwhelming presence of Small and Medium-sized Enterprises (SMEs). Companies with fewer than 300 employees account for 99.8% of businesses, serving as the core of our regional economy. Furthermore, the prefecture and local municipalities are very active in supporting entrepreneurship. Over the past 20 years, 1,398 projects involving the relocation or establishment of corporate headquarters and factories have been realized, and many new startups have been born. Proximity to Tokyo, a massive consumption market, is a significant attraction for starting new businesses.

As a regional financial institution rooted in the community, Musashino Bank views the support of these SMEs’ sustainable growth as our mission. Strengthening the foundations of employment and innovation is essential for revitalizing the regional economy, and we are focusing on supporting corporate innovation to achieve this. Finally, Eiichi Shibusawa, known as the father of modern Japanese capitalism and the portrait on the new 10,000-yen bill, was born in Saitama. His philosophy remains a source of great regional pride and breathes life into our current activities. In July of this year, an innovation hub bearing his name, 'Shibusawa Mix,' opened next to the Saitama Super Arena near Saitama-Shintoshin Station. This facility functions as a central hub for innovation through collaboration between industry, academia, and government.

Saitama City featuring advanced urban functions and rich green spaces

Could you detail the specific initiatives you are implementing, such as assisting with entry into new markets or improving production efficiency?"

The U.S. tariff policies announced this past April posed a potential impact on many Japanese companies, including SMEs here in Saitama. In response, we immediately established consultation desks at 100 locations across our entire banking network to provide direct support to affected businesses. This has allowed us to provide rapid and meticulous support not only to companies expanding overseas but also to those indirectly affected through their supply chains. While the direct impact is currently limited, we anticipate that the effects will gradually become apparent over the next few fiscal years. Some companies will be faced with critical decisions, such as whether to relocate production bases to the United States or diversify them across other countries. Our bank supports these decision-making processes, working alongside our clients to formulate the optimal strategies.

Additionally, in collaboration with other financial institutions within the prefecture, we have established an 'Innovation Fund' totaling 1.6 billion yen. Through this fund, we invest in promising startups and provide consulting services to entrepreneurs. Furthermore, to assist SMEs facing chronic labor shortages in improving productivity, we are promoting Digital Transformation (DX) and the adoption of ICT. Our goal is to help them achieve highly efficient management even with limited workforces.

In connection with the progressing aging population, I understand that the shortage of physicians is also a pressing issue in Saitama. What specific initiatives are being undertaken to maintain a sustainable healthcare system?

Yes, this is a critical challenge for the prefecture. Saitama has approximately 180 doctors per 100,000 residents, which is the lowest ratio in the nation. This is partly due to the sheer scale of the prefecture's population, as well as the tendency for medical professionals to concentrate in the Tokyo metropolitan center given our proximity to the capital. In light of this situation, we are actively supporting regional medical institutions. Beyond assisting existing hospitals with management improvements and business succession, we also provide support for doctors wishing to open new practices. We believe that enhancing the sustainability of regional healthcare is one of the most paramount issues in an aging society.

You also touched upon the issue of business succession for SMEs. Could you please elaborate on the specific support you provide in this area, including measures such as M&A?

Approximately two-thirds of the companies in Saitama are small and medium-sized family-run businesses, making the issue of succession particularly acute. Our bank has been addressing this challenge for over a decade, steadily strengthening our support systems for business succession and M&A.

In recent years, the number of consultations regarding M&A and successor searches has increased year by year. Previously, business transfers were primarily driven by elderly business owners looking to retire. However, recently we are seeing an increasing number of cases where owners in their 40s and 50s transfer parts of their business to concentrate on their core areas of expertise. M&A is increasingly being viewed positively—not merely as an 'exit strategy' for retirement, but as a proactive 'means for corporate growth. Furthermore, there is growing involvement from investment funds that support corporate management with a long-term perspective, generating new vitality throughout the regional economy.

You are also actively engaged in Digital Transformation (DX). Could you share a specific success story?

Yes. In partnership with Toyo University, we operate the 'Digital Engineering Academy.' Now in its fifth season, the program currently hosts 15 engineers from 10 companies. It is a hands-on initiative where participants implement DX directly on the manufacturing floor to solve real-world operational challenges.

One participating company, a metal gasket manufacturer, received the Excellence Award at the inaugural 'Saitama DX Award' held in 2023. With our support, they introduced IoT and production management systems, successfully transitioning from traditional mass production to a 'high-mix, low-to-medium volume' production model. Additionally, university professors and our bank staff visit these companies' worksites every month to analyze their challenges from multiple perspectives and provide support. We believe this level of hands-on engagement is something only a community-based bank can achieve.

You are also actively engaged in the field of sustainability. How are you supporting companies within Saitama Prefecture in their efforts to address SDGs and ESG initiatives?

Sustainability is a pivotal theme for our bank. To resolve regional issues and generate new commercial flows, we established a 'Regional Trading Company' that facilitates collaboration among local businesses. We have also established a system using crowdfunding to validate the marketability of new products, thereby supporting local companies as they take on new challenges. Furthermore, we engage in hands-on activities to deepen our own understanding of regional challenges. For instance, at the Minuma Rice Paddies in Saitama City, our employees participate in a rice farming project to experience firsthand the issues surrounding the aging agricultural workforce and the need for digitization. Recently, we have been testing labor-saving technology using drones for direct seeding, making it possible to seed one hectare in just a few minutes.

Musashino Bank is also actively engaged in collaboration with other banks, such as through the 'TSUBASA Alliance' and your partnership with Chiba Bank. How do these alliances contribute to regional revitalization and the strengthening of competitiveness?

We prioritize balancing 'independence' with 'cooperation.' Depending on the specific case, we may handle matters independently, or we may address them jointly through the 'Chiba-Musashino Alliance' with Chiba Bank or the 'TSUBASA Alliance,' which comprises ten regional banks.

The TSUBASA Alliance is a collaboration among regional banks whose business territories do not compete. A defining characteristic of this framework is the ease of sharing know-how, as we are not direct competitors. For example, we engage in the joint development of smartphone applications and shared monitoring systems for anti-money laundering (AML). Additionally, our partnership with Chiba Bank spans over a decade. We have established joint bases in locations such as Ikebukuro and Hamamatsucho, allowing us to approach the Tokyo metropolitan market from the perspectives of both prefectures.

The head office building in Omiya, Saitama City

To conclude, I would like to discuss the bank’s management strategy and financial performance. Musashino Bank has evolved beyond the role of a traditional financial institution, fulfilling a diverse range of functions including consulting and investment. Could you please elaborate on your future capital policy, corporate governance, and your targets for ROI and ROE?

Our foundation lies in Saitama Prefecture. Given the characteristics of this region, our business is built on two main pillars: residential loans for individuals and financing for small and medium-sized enterprises (SMEs). In addition to these, we are expanding our fee-based consulting businesses for both individual and corporate clients.

We return more than 80% of the funds entrusted to us within the prefecture back to local companies in the form of loans, thereby fulfilling our true mission as a community-based bank. The normalization of monetary policy by the Bank of Japan serves as a tailwind, and the profitability of our lending operations is on an improving trend. Furthermore, we have strengthened our fee-based consulting operations over the past decade, and they now generate over 10 billion yen in annual revenue.

Regarding our Medium-Term Management Plan, we had set an ROE target of 4.5%, but we already achieved 4.85% in the fiscal year ended March 2025. We are targeting over 5% for the current fiscal year, and we aim to exceed 8% in the new medium-term plan beginning next fiscal year. By strengthening both the 'wheels' of lending and fee-based services, we intend to achieve sustainable growth alongside the region and create a virtuous cycle that generates value for all our stakeholders.

Finally, I have a personal question. Newsweek’s readership is centered on decision-makers, including business executives and financial leaders across 59 countries. If you were to describe Musashino Bank in a single phrase to this international audience, how would you define it?"

Since our founding 73 years ago, our corporate philosophy has remained 'Regional Coexistence.' Every decision we make and every action we take is grounded in this principle. To grow together with the people and industries of this region—that is the true essence of Musashino Bank.

For more information, visit their website at: https://www.musashinobank.co.jp/