The Mitsubishi Monitor talks with Yasuyuki Hirai, president of Diamond Lease, the newest member of the Mitsubishi Public Affairs Committee.

Welcome to the Mitsubishi Public Affairs Committee. Thank you. We're proud to be part of this organization. This is a gratifying acknowledgement of the importance that our operations have attained. And that is a tribute to years of hard work by all our employees. Leasing is in your company name. But you do more than leasing, don't you? Yes, we started out in leasing in 1971. But leasing is just one of several tools that we use to fulfill customer needs.    For example, a lease might be the best way for one company to obtain, say, 100 desktop computers. Another company in different circumstances might choose to obtain the same kind and number of computers by purchasing them in installments. Yet another company might discover that taking out a loan is the best way to secure the equipment.    So we offer several kinds of financing to serve different customer needs. And we continue to broaden our service offerings. But leasing remains our core business. What are the growth prospects for your company and your industry in Japan's slow-growth economy? Excellent. Companies in Japan still use leasing for only about 8% of their purchases of equipment. In contrast, U.S. companies finance nearly one-third of their capital spending with leases. So we have ample room for growth in Japan as companies take fuller advantage of the benefits of leasing. Of course, the best scenario would also include a revival of economic and industrial expansion. Why should companies use leasing more? Leasing offers tremendous flexibility in scheduling payments and in shaping other aspects of financing. An especially compelling advantage for lots of companies is that leasing allows for moving assets off of the balance sheet.    In other words, owning equipment keeps the hardware on the balance sheet, where it depresses return on assets. Companies can structure leases to leave the ownership of their equipment with the leasing company. That gives them a leaner balance sheet and raises return on assets.    People also like the way that leasing can eliminate the burden of administering and maintaining equipment. Think of a company that has a fleet of vehicles. If they lease the vehicles, the leasing company can take responsibility for the insurance, maintenance, and repairs. That can mean huge reductions in the time and personnel that the company needs to allocate to their vehicle fleet. The advantages that you are describing are perfectly in tune with contemporary priorities in Japanese business. Exactly. Managements are striving to streamline their operations and raise return on assets. They are trying to refocus their companies on core strengths. Leasing helps fulfill those and other priorities.

We hear a lot about the problem of bad loans in Japan’s financial sector. How can you pursue growth in that sector while abiding by prudent guidelines for managing risk?
We monitor creditworthiness closely, and we compete on the basis of value, not price. We appeal to customers with our expertise and responsiveness in optimizing leases and other financing for individual customer needs. Our value-added enables us to charge margins that are more than large enough to cover our credit risk.
   An interesting growth sector for us is so-called small-ticket items. To handle those items profitably, you need to have reliable procedures for checking the creditworthiness of prospective customers quickly and efficiently. We have developed excellent software for processing small-ticket lease applications, and that software gives us a competitive edge in a promising sector of the leasing market.

What are you doing outside Japan?
We do a modest amount of business through subsidiaries in Hong Kong, Indonesia, the United States, and Ireland. Increasing our business outside Japan is a chief emphasis in ourmedium-range business plan.
   Our international operations will grow most rapidly in Asia. We are accompanying Japanese manufacturers to China and Southeast Asia to help finance their operations in those markets.
   In the United States and Europe, we have close relationships with manufacturers of medical equipment and other electronic equipment. We help market the equipment by structuring advantageous financing for customers.

How do your operations mesh with those of the other Mitsubishi companies that offer financial services?
We began as a collective undertaking by Mitsubishi Bank--now the Bank of Tokyo-Mitsubishi--and other Mitsubishi companies, and we listed our shares publicly in 1985. In 1999, we merged with another Mitsubishi-affiliated leasing firm. As a result, we now are the only full-service leasing firm among the Mitsubishi companies.
   Some of our business comes through referrals from other Mitsubishi companies. And we do a lot of business with Mitsubishi companies. But most of our business, by far, is with non-Mitsubishi customers. We are completely responsible for our own marketing. We are on our own, now, to shape our own destiny.