Major Japanese banks and other private-sector financial institutions are struggling to meet the government’s calls for cooperation in providing investments and loans to the defense industry. The government-held Development Bank of Japan (DBJ) has changed its operational rules on investments in arms manufacturers, abolishing restrictions. While a megabank official said that investments and loans will be decided on a “case-by-case” basis, commercial financial institutions generally remain cautious out of concern over possible deterioration in their corporate image and the impact on their overseas businesses, especially in China.
In July, Defense Minister Shinjiro Koizumi called for more investments and loans to the defense industry at a session with the Japanese Bankers Association and others. The growth strategy of Prime Minister Sanae Takaichi’s administration lists the defense industry as one of the 17 strategic areas for intensive investments by the public and private sectors, with an aim to bolster the country’s technology and production bases for dual-use equipment, including drones. In order to achieve this goal, the provision of growth capital to emerging companies will be key.
The amended version said such funding “can be considered,” while the old rules said that the bank would handle such matters “cautiously.” The rule change reflected the government’s revision of its three principles on defense equipment transfers and related implementation guidelines to enable the country to export lethal equipment, as well as developments in the international situation. Private financial institutions, however, have been slow to act. Major commercial lenders ban investments and loans to companies that make weapons prohibited by international treaties, such as cluster munitions.
Bankers association head Masahiko Kato, also president of Mizuho Bank, said during a news conference in July, “There are no uniform (funding) restrictions, except for those related to products prohibited by treaties.” Financial institutions “make decisions on a case-by-case basis and on a company-by-company basis,” he said. Still, a senior megabank official said, “It’s true that our industry is a little hesitant about being involved in the defense field as a whole.” In light of rocky relations between Japan and China, some people have voiced concerns about the impact of such funding on Japanese businesses in China.
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