As the long-term outlook for Japan's asset management industry strengthens, more local asset management firms are working to streamline operations by assigning non-core back and middle office functions offshore.

In a recent study by State Street, titled "The Trend Toward Outsourcing: A Case Study for Japan," it was shown that while country's outsourcing market is still in its early stages, it is able to overcome traditional resistance as the goal to become more globally competitive is pronounced. Outsourcing non-core tasks allows asset managers to focus on their core competencies and increase productivity.

The asset management industry in Japan has remained sluggish since 2008, the study said, but the outlook for the next years is positive. In fact, the Japanese market has one of the largest pools of assets under management in Asia (reportedly as big as Australia and Asia combined) and is estimated to grow to $5 trillion by 2016.

State Street says that as the local market matures, so does the realisation that companies need to be more flexible to boost scale and support expansion. The companies polled for the study agree that outsourcing offers the potential to manage talent more effectively, so the focus can be toward making inroads internationally.

"The new openness to outsourcing offers the opportunity to increase flexibility, by ensuring that the scale required to support expansion is available during a period of growth, while hedging the downside risk of excessive fixed costs in the event of an extended downturn," said the report.