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The securities industry has defended its turf on the grounds that competition is already sufficient and that allowing other institutions to offer such accounts would invite conflict of interest. Banks and other potential entrants suggest that the high profits in SITs reflect a monopolistic element, and that more competition would lower costs for ultimate borrowers. A back door to participation by banks in investment management is provided by investment advisory companies, which provide advice on how to manage assets (and in some cases are permitted total discretion in use of client funds) in return for fees.

In any event this is one area in which banks' attempts to expand their securities interests have been firmly rebuffed. Finally, in preference to non-statutory reforms, the Japanese authorities may be prepared to consider radical changes in the law, particularly if the US Glass-Steagall Act is amended. Article 65 of the Securities and Exchange Law might itself be repealed; or banks might be permitted, through appropriate changes in the Anti-Monopoly Law, to establish wholly owned securities subsidiaries.

Nevertheless, much of the paper's description of how Japanese banks are adapting concentrates on the ways in which they are moving into the new areas. In this respect Feldman notes: • • • • • • a greater sensitivity to risk management systems; a lengthening of all banks' liabilities and a reduction in the differences between different types of banks on both the asset and liability side; an increase in the share of free-rate assets and liabilities (that is, not under interest rate restrictions); an increase in 'retail'-type lending (housing and consumer finance) and tentative moves into the retail sector of investment advice; a move by banks into new business of the securities type (bond dealing, CPs, private placements); and the spectacular increase in the international activity of Japanese banks.