Mongolia may seem like an extremely exotic investment destination in a world where money is heading for safety and avoiding risk, especially when violent riots are seizing the capital, Ulan Bator. But not for Junichiro Sano, president and CEO of Dalton Investments KK. “I found really special investment opportunities,” Sano said at the Reuters Japan Investment Summit. Sano said he’s been travelling to Mongolia regularly to learn more. The Mongolian Stock Exchange is made up of 360 companies and a total market capitalisation of $750 million, Sano said. As for corporate governance in Mongolia, a topic of much debate at the summit, Sano simply said: “It is nothing.” Seventeen stock brokers are in the country, but there is no official qualification. Riots have hit Ulan Bator this week, leading to five deaths, over accusations of fraud in a parliamentary election held last weekend.

Japanese companies are on the prowl for foreign assets, and this time it has nothing to do with Rockefeller Center and world-famous golf courses as Japan was famed for snapping up in the late 1980s at inflated prices. Steven Thomas, managing director and head of Japan mergers and acquisitions at UBS, said at the Reuters Japan Investment Summit that Japan Inc. sees foreign acquisitions as necessary to open up growth opportunities.

No country has been a bigger fan of the dollar over the years as Japan. You can see it in the country’s $1 trillion of foreign exchange reserves almost entirely concentrated in U.S. bonds or the sheer portfolio flows in the greenback month after month. But that may be changing. Yuuki Sakurai, head of financial planning and investment at Japan’s No. 9 life insurer Fukoku Mutual Life, said the dollar’s long role as the centre of the global currency universe may be coming to an end, partly due to politics. “Look at the U.S. position in the world community, that’s changing and that’s part of the story. I think Pax Americana, that regime is gone. But it’s not happening overnight, it’s changing gradually,” said Sakurai, whose oversees about $54 billion of assets, while speaking at the Reuters Japan Investment Summit. “If you think that a paradigm based on the dollar may be starting to change and that the euro’s weight globally may come close to matching the dollar’s presence, the dollar might fall to 80 yen in the future,” Sakurai said. “I am saying something a bit extreme, but the dollar might fall below 50 yen 10 years from now,” he said. The dollar is near 106.50 yen now, up from a 13-year low of 95.77 yen in March, but it is still not far from record lows against the euro.

When you’re in charge of $1.5 trillion of assets, keeping an eye on it with all of 80 people is not so easy. So says Takahiro Kawase, President of Japan’s Government Pension Investment Fund – the world’s largest government pension fund that manages about 150 trillion yen assets, nearly the size of Italy’s entire economy. And Kawase would like some help, even as the government keeps pressuring the agency to reduce costs and staffing. “We need more people and more resources to do what we really need to do,” Kawase told the Reuters Japan Investment Summit. “When I talk about foreign pension funds … they are growing in terms of size. They are investing in systems. In Japan, the traditional thinking is that its a cost centre. But I’m trying to change that.” At a staff of about 80, that comes to about $190 billion per employee.

While Japan can do more to improve corporate governance, Tokyo Stock Exchange President Atsushi Saito said comparisons to the United States need a little context. Saito said the Federal Reserve’s decision to sell Bear Stearns off to JP Morgan Chase for a mere $2 a share in a weekend firesale was not exactly in the interest of Bear’s shareholders. “Is that respecting shareholders? You have to think about that,” Saito told the Reuters Japan Investment Summit in Tokyo. One persistent criticism of Japanese companies do not have enough outside directors on their boards. But Saito also noted that a majority of the board members at Enron – the poster-child of the U.S. corporate scandals in 2002-2003, along with WorldCom – were from outside the company. And Saito said it was a little worrying how the US Congress has been itching to take action against China with the variety of laws introduced that threaten sanctions and limits on investment. “Everything is not going according to logic.”

The rest of the world is feeling the global credit crunch, but Japan’s cash-rich firms are looking to expand overseas.

Dan Sloan reports.

Takafumi Sato, commisioner of Japan’s financial regulator, makes no bones about the government’s desire for Tokyo to be the No. 1 financial centre in Asia, and he rattled off a variety of reasons why foreign investors and professionals ought to set up shop here. Among them: the world’s second largest economy, democracy and the rule of law, great restaurants, abundant household assets needing management, low crime, great public transportation, four beautiful seasons.

“Now is an excellent time for Japan to close the gap with other global markets,” Sato told the Reuters Japan Investment Summit in touting the Financial Service Agency’s “Better Market Initiative.”

But in what could be seen as a dig at rival Hong Kong, one of Sato’s reasons stuck out — “less-polluted air.”

According to Mercer’s 2008 survey on quality of living worldwide, Tokyo did top Hong Kong with a ranking of 35 compared to 70. In “health and sanitiation,” Tokyo was far ahead of Hong Kong. But another Asian rival, Singapore, is just ahead in the overall rankings at 32. And even for Japan’s renowned safety (imagine your forgotten iPod being returned to the front desk at the gym), Singapore also bested Tokyo.

Then again, there are all those Michelin-starred restaurants.

Sato’s listing of Tokyo’s attributes was in reponse partly to another issue that has cropped up when it comes to attracting talent to Japan’s megalopolis: nannies. To some critics, Japan’s strict immigration laws that make it difficult for foreign workers to bring nannies with them highlight Tokyo’s detractions.

Allan Smith, president of the American Chamber of Commerce in Japan, told the summit Japan has made strides to help foreign companies and financial firms operating here but could do more, such as better clarity in regulation.

“I wouldn’t want to say that if Japan built a Canary Wharf and offered nanny visas, everyone would come flocking. There are other things as well,” Smith said.

But one of Smith’s suggestion would likely make the FSA happy: “If Japan is going to be a financial services centre, it is going to have to increase the resources of the FSA.”

Analogies abound when it comes to assessing just how far the world has come in coping with the subprime mortgage crisis originating from the United States.

In American terms, the nine innings of baseball games are often invoked. In Japan, it is often how far up the mountain you’ve climbed.

Tatsuo Tanaka, deputy president of Bank of Tokyo Mitsubishi-UFJ, told the Reuters Japan Investment Summit that some fear the subprime debacle means one mountain peak has been scaled but another looms ahead.

While he doesn’t share those worries, the uphill slog is not over yet. “We are already past the fifth station,” he said in response to a question about where we stand in the crisis, referring to the half-way point in climbing a mountain in Japan. “The biggest part of the confusion is behind us. But in terms of impairment of capital, it is not over,” Tanaka said.

So far subprime-related losses have totalled more than $400 billion, and that figure is still climbing.

Famous for high-tech products, Japan has become synonymous among foreign investors for heavy regulation and taxes.The world’s No.2 economy is much farther down the ladder ranking when it comes to foreign investment or ownership, although trying to change that.

Dan Sloan reports.