Japan weighs government-backed bank lending scheme to spur strategic investment

By Makiko Yamazaki

TOKYO, Oct 29 (Reuters) - Japan’s government said on Thursday it is considering a scheme to channel public funds through private lenders to support corporate investment, seeking to ease funding constraints at banks and accelerate investment in strategic growth sectors.

The Ministry of Economy, Trade and Industry (METI) is studying an expansion of a financing framework that would allow the government-backed Japan Finance Corp (JFC) to provide funds to commercial banks, which would then lend to companies undertaking large-scale investments and acquisitions.

The proposal was presented at a public-private investment forum created under the government’s asset management strategy to improve capital flows into priority growth sectors and large-scale corporate investments.

Under the proposal, the government would also provide partial loss guarantees on qualifying loans, reducing lenders’ credit risk and encouraging financing for projects deemed important to Japan’s long-term growth strategy.

Demand for financing is expected to increase further as companies invest in 17 priority sectors identified by the government, while large-scale and long-term projects often carry higher risks and face greater hurdles in obtaining funding from private financial institutions alone.

Prime Minister Sanae Takaichi’s government has set a target of mobilising more than 370 trillion yen ($2.4 trillion) in public and private investment in strategic sectors, including semiconductors and AI, by fiscal 2040 as part of its broader growth strategy.

($1 = 157.7600 yen)