Financing in Yokohama

Included are instances of large project financing. Explains international development banks’ activity in and other aid-funded projects where US bidders are ConsolidationNow welcome.

While some major US corporations have good contacts with Japanese “city banks,” most medium and small US corporations have difficulty obtaining trade finance services for importing and distributing. In Japan, real estate is still preferred as collateral for credit appraisal. Also, unlike in the US, where creditworthiness is the primary determinant in lending choices, a company’s capacity to borrow may be impacted by personal contacts and rapport with bank officials. Some smaller enterprises report having to get funding from overseas sources. Companies having operations in Japan have found that forming joint ventures with Japanese partners has helped them get better treatment from Japanese banks.

In addition to traditional loan offerings, several U.S. banks operating in Japan concentrate on greater value-added areas of business. As part of the credit evaluation process, Japanese banks look at the financial state of both the borrower and its parent business. To avoid defaulting on payments, the parent firm is typically asked to guarantee the obligation (a “Letter of Awareness” may be substituted for a guarantee loan).

Export Insurance and Financing

To stimulate imports and foreign investment in Japan, the government offers tax breaks, loan guarantees, and low-cost loans to Japanese and international investors for import infrastructure via the Development Bank of Japan (DBJ). The Ministry of Economy, Trade and Industry (METI) and the Japan External Trade Organization (JETRO) have formed import divisions to promote imports.

For example, the Japan Bank for International Cooperation (JBIC) offers low-interest loans to stimulate imports and investment in Japan.

In order to address Japan’s external imbalances, the Japan Bank for International Cooperation (JBIC) assists Japanese enterprises in their trade and investment operations. 

The JBIC’s manufactured goods import credit program supports the import of manufactured products from developed nations to Japan. Importers, wholesalers, and retailers registered in Japan may apply for four-year guaranteed or secured loans with up to 70% loan-to-value and credit lines at favorable interest rates. There are also delayed payment loans available to international exporters, as well as foreign manufacturers and intermediate financial institutions investing in manufacturing facilities and equipment for the Japanese market.

The DBJ gives loans to encourage imports into Japan. These loans are accessible to Japanese enterprises with at least 33% foreign capital or non-Japanese corporations with registered branches in Japan for 40-50% of project expenditures. The GOJ now owns 100% of the DBJ but wants to lower its holdings by 50% during the next decade.

Japan Finance Corporation for Small Businesses extended initiatives to help import sales. The initiatives seek to help small retailers, wholesalers, and importers invest in Japan to boost imports.

The Japanese government offers no export insurance to Americans.

Other Loans

Japan has been a member of MIGA since 1988. Prefectures and municipalities also grant unique depreciation of corporate assets, tax deferrals for replacement of specified assets, and exemption from special land-owning taxes charged by municipalities. Most prefectures also provide loan programs to assist businesses get started.

Prime Minister Abe’s so-called “third arrow” seeks to increase funding for start-ups and small and medium-sized businesses. For example, start-ups under three years old may now claim a $10 million tax break. It was further revised in 2015 to allow crowd fundraising, allowing smaller businesses to obtain funds more readily, even online.

The size of Japan’s venture capital specialty funds is believed to be half that of the US. Traditionally, leading Japanese VC companies functioned more like banks. Due to the Financial Services Agency’s strict rules for firms wanting to go public, even the greatest companies may take up to a decade to be listed on the OTC market. The Hercules, JASDAQ, and NEO systems were integrated in October 2010.

Types of Projects Funded

A Partnership for Quality Infrastructure: Investment in Asia’s Future This $110 billion institution combines resources from Japan’s ODA and the Asian Development Bank (ADB). Other national infrastructure projects in rising Asian regions beyond Japan are also targeted by this financing.

JBIC also offers loan guarantees to private financial institutions, short-term loans to developing countries’ governments (bridge loans), and equity involvement in Japanese corporations’ abroad ventures. Its international finance activities target projects in poor nations that local financial institutions are unable to fund. JBIC’s loans are distinct from OEC’s activities, which help the economic growth of poor nations.

RDI Assistance

The Japan Regional Development Corporation (JRDC) and the Regional Economy Vitalization Corporation of Japan (REVIC) both assist specific sorts of regional initiatives inside Japan.

Loans for overseas investment and projects

These loans are usually made to Japanese companies for foreign investment and projects. Foreign governments may also make capital investments or loans to overseas joint ventures incorporating Japanese money.

Unsecured Loans

Extraordinary projects and economic reform initiatives in poor nations now include international governments and financial institutions (including multilateral development banks). These loans are not related to the purchase of Japanese products and services, but rather to the particular goals for each loan. JBIC manages these loans.

About Mohammed B. Hale

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