The coronavirus pandemic is deepening the pain for Japan's regional lenders, heightening concerns that a potential wave of business closures will test policymakers' ability to avert a damaging banking-sector crisis.
KYOTO - The coronavirus pandemic is deepening the pain for Japan’s regional lenders, heightening concerns that a potential wave of business closures will test policymakers’ ability to avert a damaging banking-sector crisis.
“Banks are aggressively lending now because the government is asking them to, but that could change once it becomes clearer some companies cannot survive,” one of the people said.With Tokyo still encouraging regional banks to pump money to needy borrowers, efforts to mitigate a subsequent build-up of bad loans will take a back seat, another source said.
Regional economies are more vulnerable to shocks than big cities because of their over-reliance on sectors such as tourism, and fewer jobs as more firms move out of ageing, dwindling local markets. “The damage from the pandemic will probably last for about two years,” Kansai Mirai President Tetsuya Kan told Reuters.
“At present, Japan’s financial system is stable” with regional banks having sufficiant capital buffers, the country’s banking regulator Financial Services Agency said. The fear among policymakers is a negative loop where rising bankruptcies weaken regional banks’ ability to lend, forcing more firms under.
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