Because Japan has a sizable economy and a business culture that is uniquely Japanese, for most global investment banks there has been a two-pronged approach to Asia: Japan and Asia "ex-Japan" (everything in Asia outside of Japan). Banks have traditionally run these two operations out of Tokyo and Hong Kong, respectively.
Historically, Asian operations have not been as profitable as European or North American regions and thus have seen cycles of investment and retreat. In general, the relative amount of investment that investment banks placed in their Asian operations followed the boom and bust cycles of of the stock markets. This is especially true for second-tier investment banks. The Asian economic crisis in the late 1990s, clearly showed how investment banking activities until recently tended to follow the general pricing level and stability of the capital markets -- in the wake of the fall of the markets affected by the crisis, investment banks reduced their operations in the region significantly.
However, as the global economy has become more intertwined and interdependent, there has been more consistent investment in Asia independent of the performance of the markets. In addition, the emergence of China and India has led investment bank to deploy more resources and investment to cover increasing M&A and IPO activity in the region. Any serious player in this industry needs to invest to build sizable local operations, client networks and local professional resources (such as accountants, legal counsel, etc.).
Who are the bankers in APAC?
Asia-based investment bankers come from all types of professional and ethnic backgrounds. There are bankers originally from the U.S. or Europe who have some links to Asia in their backgrounds (family links, language studies, etc.) who decide to take a try at working in Hong Kong. There are bankers who grew up in Asia, received top MBA degrees in the U.S., Europe or Asia, and decide to work in Asia for their long term careers. There are Asian bankers who work for bulge bracket firms who find themselves placed on Asian deals because of to their ethnic backgrounds. Since working in Asia is not everyone's cup of tea, there is usually high turnover of bankers -- most bankers not originally from Asia stay in their Asia roles for two to three years.
The rainmakers at the banks' APAC operations are usually topnotch investment bankers from the U.S. and Europe leading global M&A transactions. Sometimes, however, these rainmakers are well-connected locals who have strong relationships with some Asian governments and their officials. Because the use of relationships (or "guanxi," as it is known in Chinese) is one of the ways to improve business development, many investment banks in Asia focus on this "marketing" activity. Many, if not all, bulge bracket firms operating in Asia use this to improve success rates.
Before the emergence of China and India as economic powerhouses, bulge bracket investment banks focused their presence in the Asia-Pac region in Hong Kong and Japan.