Tokyo sliding to #21 among Global Financial Centers
The 33nd edition of Z/Yen’s Global Financial Centres Index (GFCI) has been published, and just like six months ago, we once more regretfully note that Tokyo is dropping faster than you can say “Global Financial City Tokyo”, now ranking outside of the Top Twenty, all the way down to the 21st spot.
The GFCI is the longest study of this kind, being published semi-annually and hence having over 16 years of publication under its belt. The methodology combines 153 quantitative measures provided by third parties including the World Bank, The Economist Intelligence Unit, the OECD, and the UN, with 61,449 assessments of financial centers provided by 10,252 respondents to the GFCI online questionnaire.
From an all-time high third position in March 2020, Tokyo’s fall has been quite dramatic, via 4th place in September 2020 and 7th in March 2021, to ninth place in September 2021 and March 2022. Dropping out of the Top Ten in September 2022, Tokyo now finds itself out of the Top Twenty.
This also puts Tokyo into the eighth regional regional spot behind Singapore (#3), Hong Kong (#4), Shanghai (#7), Seoul (#10, new entry into Top Ten), Shenzhen (#12), Beijing (#13), and Sydney (#15).
While we like to think (just like six months ago) that the late post-pandemic opening has had an impact, Singapore and Hong Kong, which also had fairly restrictive lockdowns, have not suffered a plunge over the past years. Additionally, the GFCI assessment also asks respondents which centers they consider will become more significant over the next two to three years, with Seoul (#1), Singapore (#2) and Hong Kong (#4) featured at the top, while there is no mention of Tokyo among the fifteen highest ranked cities.
Among the five areas of competitiveness (Business Environment, Human Capital, Infrastructure, Financial Sector Development, Reputational & General), Tokyo features in the Top Fifteen only once, for the Business Environment. Similarly, across the eight industry sector sub-indices (Banking, Investment Management, Insurance, Professional Services, Government & Regulatory, Finance, FinTech, Trading), Tokyo nabs only one Top Fifteen ranking, for Government & Regulatory.
The methodology-driven ranking of the GFCI is augmented with financial center profiling that uses clustering and correlation analysis to identify three measures that determine a financial center’s profile along different dimensions of competitiveness (Connectivity, Diversity, Specialty).
The 10 Global Leaders surfaced by this profiling have both broad and deep financial services activities and are connected with many other financial centers. It is noteworthy that this list includes only four of the Top Ten global financial centers in GFCI 33, and it *does* include Tokyo, thus allowing us to keep propagating the “Global Financial City Tokyo” nomer with some honor.
Lastly, alongside the main GFCI index, Z/Yen also analyze financial centres in terms of their FinTech offering. Unfortunately, we see a similar drop here for Tokyo, down four spots to 29th, a notable slowdown from the loss of 10 positions in September 2022, but a decline nonetheless. If we use this most recent report to call a bottom, then with the next issue in September 2023, we would expect at least stable rankings for Tokyo, if not a slight improvement. Obviously, this type of index is both absolute (in terms of the rating) and relative (in terms of the ranking), so it will not suffice for Tokyo to improve, it will need to do so at a higher acceleration than its competitors to make up lost ground.
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