Okinawa Financial Group is leveraging its bold “Moonshot” growth plan, digital transformation and hands-on regional initiatives to boost profitability, strengthen shareholder returns and revitalize local communities, positioning this innovative regional bank as a rising financial hub between Japan and the wider Asia-Pacific region.
May I begin by asking about your company’s second mid-term management plan? I understand that your company set its performance targets for fiscal year 2027 in fiscal year 2023it was initially considered extremely ambitious. Targets included net income of 10-billion-yen, ordinary revenues of 60 billion yen, and a return on equity of around 6%. remained focused on advancing ROE targets while also strengthening communications around capital efficiency and sustainable shareholder returns to enhance investor confidence. Within this context, could you first share an update on the current financial status of the Okinawa Financial Group?
Thank you for the question. Let me first reflect on our most recent fiscal year results, which closed in March. Consolidated operating revenue was 58.8 billion yen, consolidated ordinary profit reached 10.5 billion yen, and consolidated net income came to 7.9 billion yen. This marked the third consecutive year of both revenue and profit growth. Furthermore, our results for the first quarter of fiscal 2025, which ended this past June, also showed increases in both revenue and profit.
That is impressive progress. Let us turn to your so-called “Moonshot” initiative. The word itself originates from President John F. Kennedy’s challenge to send humankind to the moon. Could you explain why you adopted the “Moonshot” concept and what it means for your organization?
The Moonshot concept embodies our determination to pursue a fundamentally new trajectory — management that is not a mere extension of the past but rather something bold and transformative, as if aiming for the moon.
We are currently growing in both revenue and profit, but we believe that continuing with same management methods alone will not be sufficient to sustain growth going forward.
In concrete terms, under this framework we set consolidated ordinary revenue at ¥60 billion, an increase of approximately ¥10 billion from the then-actual figure of ¥50.4 billion. We also set the net income target at ¥10 billion, double the then-actual figure of ¥5 billion. These targets were originally set as part of a three-year mid-term plan, with March 2027 as the goal year. However, progress has been so strong that we now expect to achieve them by the end of fiscal 2025, a full year ahead of schedule.
Consequently, we revised the Moonshot targets upward again: raising our ordinary revenue goal to 71-billion-yen, net income to 11 billion yen, and ROE from 6% to 6.2%. That, in essence, is the rationale behind the Moonshot.
Those targets are indeed striking. Before reaching them, what initiatives are you putting in place to support achievement? Could you describe some of the concrete measures your bank is undertaking?
The majority of a bank's profits come from lending. To strengthen this area, we have used digital transformation (DX) to streamline administrative functions, reducing headcount in back-office operations. Those freed-up human resources have been reassigned to the front lines, focusing on lending and sales.
As a result, we are now able to capture lending demand across Okinawa more effectively and swiftly than ever before, which has boosted our top-line revenue. On the cost side, we have also pursued rigorous efficiency measures. The combination of increased lending income and significant cost reduction has put us firmly on track to achieve our Moonshot targets, and this progress enabled us to raise those targets further.
We have also committed to enhancing shareholder returns. For example, dividends per share, which had been 80 yen annually, were raised to 105-yen last fiscal year — a 25-yen increase. Our policy is to maintain a minimum of 90 yen and to follow a progressive dividend policy, increasing steadily over time. Accordingly, from last year’s 105 yen, we plan to further raise dividends to 120 yen this fiscal year.
Following the interview, Okinawa Financial Group announced an increased dividend. It raised its annual dividend forecast per share by an additional ¥20 to ¥140.
In addition, strengthening investor trust requires robust corporate governance. To that end, we transitioned to an Audit and Supervisory Committee company structure, enhancing the effectiveness of our Board of Directors. With more active participation by external directors, the quality of board discussions has deepened considerably. We also improved pre-meeting briefing processes, enabling swifter decision-making during board sessions. This has materially improved governance and management responsiveness.
With such strong performance, have you seen increasing interest or inquiries from overseas investors?
There has indeed been a significant increase in contact from overseas investors. Importantly, some of these inquiries are from entirely new investors who had not previously engaged with us. This growing international interest is a welcome development.
Earlier you mentioned how DX helped reallocate staff from back-office functions to lending. Beyond operational efficiency, how else are you leveraging DX? And I also understand your group has been making efforts in areas such as HR innovation. Could you expand on this?
Certainly. Within Okinawa, digital transformation has not advanced as quickly as in other parts of Japan. We have therefore not only introduced DX within our own operations but also begun promoting it to local businesses and organizations. We see financial institutions as natural leaders in DX adoption in the prefecture, and we believe it is our mission to share our expertise widely — with corporations, local governments, and individuals alike.
Through these initiatives, we can help companies address management challenges and support broader regional development. Another pressing issue in Okinawa is the shortage of business successors. At present, the prefecture ranks among the worst five in Japan for succession shortages — though ten years ago we were ranked the worst in the country. The rate of businesses without a successor remained in the 80% range from 2021 to 2020; today that figure is about 65%. While it has improved, largely due to M&A activity and some natural closures during the pandemic, the issue remains severe.
To address this, we have developed a strong M&A advisory capability. We now have 243 certified M&A Senior Experts on staff — a significant resource we are deploying to help business owners without successors find sustainable paths forward. We also operate Okinawa Bank Success Partners, a joint venture with Japan’s largest M&A intermediary, Nihon M&A Center Inc. Through this platform, we are actively advancing business succession solutions across Okinawa.
Let me shift to regional revitalization. Japan has launched its “Regional Revitalization 2.0” policy nationwide. How does your group approach the challenge of revitalizing Okinawa?
Japan as a whole has long been highly centralized around Tokyo. The government, including Prime Minister Kishida, has repeatedly emphasized the importance of regional revitalization in light of nationwide demographic decline. Okinawa, too, shifted into population decline about three years ago.
The prefecture faces dual challenges: poverty and population decline. Okinawa has one of the highest poverty rates in Japan. Furthermore, population decline is concentrated in rural and island area. Within Okinawa Prefecture itself, population is rapidly decreasing outside of Naha City and its surrounding areas, and this is particularly evident on many of the remote islands.
As a regional bank, our mission is to support these communities directly. For example, there are ten municipalities on outlying islands of Okinawa where staff shortages have become one of the challenges facing the administration. In response, Okinawa Financial Group has seconded 13 of our employees to these municipalities. They volunteered for this “job challenge” program, integrating into local communities to provide much-needed expertise in areas such as DX and planning.
Initially, while the local community welcomed the seconded employees, there may have been a subtle sense that they were not originally from the area. However, as time passed, their genuine desire to contribute to the community resonated with local residents, helping them gain trust and be fully accepted. Today, they have become valuable members of the community. This has opened the way for broader consultation and collaboration. Such initiatives are rare nationwide, and we believe they could serve as a model for other prefectures facing similar challenges associated with remote islands such as Nagasaki or Kagoshima.
We also contribute through the Regional Revitalization Support Tax Incentive, providing a total of 90 million yen annually in collaboration with partner companies within the prefecture. These funds are distributed across the ten island municipalities and used to support local infrastructure.
Our efforts were recognized last year when we received the Minister of State for Regional Revitalization Award.
Japan’s” Regional Revitalization Support Tax Incentive” — enables companies to make tax-deductible donations to government‑approved regional development projects. This initiative supports local governments in addressing regional depopulation and economic revitalization, while allowing businesses to actively contribute to sustainable community growth.
Before we conclude, I would like to ask two final questions to better understand Okinawa Financial Group’s philosophy. Suppose we return for another interview five years from now. What achievements, dreams, or ambitions would you hope to share with us then?
There are two things I would highlight. First, Okinawa currently has the highest poverty rate in Japan. Within five years, I would like to see us overcome that unfortunate position. We may not become the highest, but escaping the bottom ranking would be significant progress.
Second, although it may take longer than five years, our broader dream is for Okinawa to become a central hub in Asia. With its geographic advantage, Okinawa lies within five hours’ flying distance of a market of two billion people. For example, from Okinawa one can fly directly to Singapore on a low-cost carrier — something that is not possible from Tokyo. We believe Okinawa can grow into a hub similar to Singapore, connecting Asia and attracting international attention.
Okinawa is indeed blessed with natural beauty and warm, welcoming people. Yet what do you believe is still missing for it to become such an Asian hub?
What we lack most is the ability to communicate Okinawa’s strengths to the outside world. If we can build stronger communication and storytelling capabilities, then Okinawa’s geographical advantages will become far more apparent internationally.
Finally, if you had to describe Okinawa Financial Group in just one line to Newsweek’s international readers, particularly in the context of your vision for Okinawa as Asia’s hub, how would you express it?
That is a difficult request — to capture everything in one line. But if I had to put it simply, I would say: we aspire to be the best regional bank.
To read more about Okinawa Financial Group, check out this article about them.
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