CFA Advantage

Learning the Language of Economic Activity

First Japanese Charterholder, Akio Mikuni, CFA, Says the Skills Learned in the CFA Program Have Allowed Him to Succeed in Several Fields
By Rose Fry

xamining the world from the perspective of a financial analyst has shown Akio Mikuni, CFA, a great deal. He has taken his training as a CFA charterholder, developed a thriving credit-rating business, and turned to examining the larger issues in the economy around him. Profiled in the Financial Times and Fortune magazine, he is a strong advocate for change in Japan and has become what Business Week called “one of the 50 most influential individuals in Asia” in 1999.

	President and founder of Japan's first independent, investor-supported bond- ratings agency, Akio Mikuni, CFA, now rates as one of the most prescient economy watchers in Japan. Mikuni was the first analyst in Japan to earn a CFA charter and is the author of Japan’s Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance and Japan: The Road to Recovery.

         Although his perceptions have never been well-received by Tokyo officials, he nonetheless does not apologize for his views.
        “I am trying to see how the system can change and improve its efficiency,” he says. “The preparation for earning a CFA charter — developing an understanding of financial analysis — really helps you to understand what’s going on in the world.”
        Mikuni’s career focus began in the 1950s, when he spent a year at a U.S. high school. During his stay in Massachusetts, he was surprised and interested to hear dinner guests discussing equity investing at the dinner table.
        “In Japan at that time there were no such conversations,” Mikuni explains.
        He returned to Japan with a lingering desire to learn more about investments. In the early 1960s, Japanese companies such as Honda and Sony were just making inroads in the consumer market, drawing the interest of foreign institutional investors. At the same time, recently graduated from college, Mikuni became a trainee at Nomura Securities which took advantage of his experience in the United States and his English skills to sell Japanese securities in New York.
        At that point, information on Japanese investment opportunities was scarce in the United States. Analysts and fund managers in New York flooded Mikuni with questions, which he was unprepared to handle. He began taking graduate courses at New York University to learn accounting and corporate finance. But Mikuni found this was not enough. He needed to learn how to evaluate a company and write a financial report that analysts and fund managers could use.
        Realizing that he needed to have a comprehensive knowledge of investments to serve his clients well, Mikuni entered the CFA Program. Alongside his up-and-coming clients, he trained himself on the finer points of finance and wrote the first institutional research report on Japanese securities as a Japanese analyst.
         By learning how to ask the right questions, Mikuni was granted access to top management in Japanese companies at a time when such access was unheard of. Japanese analysts were only allowed to visit company accountants and had no power to make investment decisions or recommendations. He explains that the Japanese market primarily operated with cross-shareholding (keiretsu), where institutional investors bought shares to maintain relationships, not to meet performance objectives. They were looking for reciprocal business instead of measurable profit. However, as foreign investors bought more and more shares in Japanese companies, management became increasingly willing to talk to analysts.

        “At that time, there was a genuine need for security analysis from the outside,” Mikuni says. “Foreign investors fostered the growth of securities analysis in Japan.”
        According to Mikuni, the knowledge he was acquiring through the CFA Program helped him to be competitive in the international market. While in New York, Mikuni completed levels I and II of the CFA Program. Upon his return to Japan, he joined the institutional research department at Nomura Securities, where he helped develop their securities analysis program.
        When he earned his charter in 1969, the first in Japan, he gained national attention. The media swarmed, covering his achievement as testimony that any individual, even in Japan, could not only join the investment arena, but succeed.
        “My earning the charter gives the image that Japanese analysts could be competing with American analysts,” he recollects. “And on an equal level.”
        By the early 1970s, he decided to found his own firm.
         “I was so well known because of the CFA charter, I felt confident about starting my own business,” he says.
         Mikuni & Co., Ltd. launched in 1975 providing consultation and research. To that point, only about 100 Japanese companies were issuing bonds. By 1980, sidestepping Finance Ministry policy, Mikuni expanded the business and became Japan's first independent, investor-supported bond-ratings agency. Foreign investors were the agency’s primary subscribers.
         As Mikuni’s research encompassed more and more companies, he became increasingly aware of the need for change in the Japanese economy. He became an advocate for reform, warning of problems with Japan’s economic recovery. His research papers, articles, and books examined Japanese market functions, money allocation, and effects of market policy. His voice became well known and often quoted in international publications.
         Even today, after more than 40 years in the business, he is passionate about the need for individual Japanese investors to participate in the market and invest in securities. He explains that in Japan, the government still has a strong hand in allocating assets. Individual share ownership is low. As Japan enters its 15th year of economic stagnation, Mikuni feels that securitization will play an important role in helping the Japanese economy pull itself out of its multiple troubles.
         “My dream is to see that government support of unprofitable businesses is ended,” Mikuni says. “That’s my commitment.”
        Looking back on his years in the investment profession, he traces his career from equity analysis to bond analysis to economic analysis and says that in each phase he used the same skills of financial analysis learned in the CFA Program.
         “The CFA Program has allowed me to do all of these things,” he says. “The CFA charter allows you to speak the language of economic activity.”