Japan Weighs Routing Public Funds Through Private Banks to Spur Strategic Investment

Japan's government said Thursday it is considering a scheme to channel public funds through private lenders to support corporate investment, aiming to ease bank funding constraints and accelerate investment in strategic growth sectors. The Ministry of Economy, Trade and Industry is studying an expansion of a financing framework that would let government-backed Japan Finance Corp provide funds to commercial banks, which would then lend to companies undertaking large-scale investments and acquisitions. The government would also provide partial loss guarantees on qualifying loans, reducing lenders' credit risk. The proposal was presented at a public-private investment forum created under the government's asset management strategy. Demand for financing is expected to rise as companies invest in 17 priority sectors, while large, long-term projects often face higher risks and greater difficulty securing private funding alone. Prime Minister Sanae Takaichi's government targets mobilizing more than 370 trillion yen ($2.4 trillion) in public and private investment in strategic sectors including semiconductors and AI by fiscal 2040.