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Tourism boom gives hope to Japanese regional banks
By Mari Iwata
Some regional banks in Japan are seeing hope in a surge in tourism.
Japan eased tourist visa requirements in 2013 to boost economic growth, and by 2015, the annual tally of foreigners visiting the country nearly doubled to
19.74 million from the year the rule change took place, mostly driven by tourists from China, Taiwan and South Korea, according to government data. In the
first three months of 2016, arrivals in Japan climbed 39.3% year over year, with those from the three neighboring countries accounting for more than 60% of
the total.
The tourism boom is creating business for Japanese banks under pressure to survive declining local economies.
Hokkaido Bank Ltd., a unit of Hokuhoku Financial Group Inc., in March signed four agreements for cooperation with as many regional governments in areas
including tourism. In the following month, the lender, based in its namesake prefecture, one of the most popular tourist destinations in Japan, inked similar
pacts with another three municipalities.
While details for the partnerships are still being worked out, the lender has already benefitted from efforts to reinvigorate its home market of Hokkaido. Over
the past two years, the bank has financed projects to upgrade buildings and transportation infrastructure. Also, Hokkaido Bank arranged a ¥1.45 billion
syndicated loan to the operator of a ferry linking Hokkaido and two other small islands to help the company to buy a new ship.
"We have seen positive effects on the economy," a Hokkaido Bank spokesman said.
On the other hand, Bank of Iwate Ltd., which targets the second-biggest prefecture in Japan behind Hokkaido Bank, has signed six cooperation agreements
with seven municipalities since the start of 2016.
"Regional banks have pursued symbiotic relationships with communities in their local areas," said Shinya Furue, an analyst at Norinchukin Research Institute.
"Inbound tourism matters in this context."
Development Bank of Japan Inc. has been providing support for the tourism industry as well. The state-owned lender formed a fund in 2014 with a
government agency and a property fund management firm to offer low-rate loans for the sector.
The fund then created four sub-financing vehicles with regional banks to aid tourism projects, such as revamping traditional houses in historical areas and
old hotels in popular tourist spots.
The emergence of tourism as a fast-growing industry could breathe life into Japan's stagnant economy.
The influx of foreign visitors contributed ¥10.6 trillion to Japan's GDP while creating 630,000 jobs in 2015, according to an estimate by Hiromasa Matsuura, an
economist at Mizuho Research Institute. Because effects of growth in tourism tend to show after a lag of several months, it will likely continue to give a
boost to the Japanese economy through 2016, Matsuura said.
Before the visa rule relaxation in 2013, Japan had been wary about developing tourism aggressively because of concerns about illegal immigrants. The
tourism industry still accounted for just 2.3% of Japan's GDP in 2015, according to government data.
But with the way things are going now, unless Asian economies slow drastically, that share can increase substantially. And that would be a welcome
development for banks desperate for growth.
"It would depend on transportation and how each community can leverage local resources to make themselves attractive," said Akiko Kohsaka, a senior
economist at the Japan Research Institute.
As of May 16, US$1 was equivalent to ¥108.84.
Source: S&P Global Market Intelligence | Page 1 of 1