trending Market Intelligence /marketintelligence/en/news-insights/trending/WwahZRmNrPQ5RSWqCmf0-w2 content esgSubNav
In This List

Tourism boom gives hope to Japanese regional banks


Banking Essentials Newsletter: 7th February Edition

Case Study

A Bank Outsources Data Gathering to Meet Basel III Regulations


Private Markets 360° | Episode 8: Powering the Global Private Markets (with Adam Kansler of S&P Global Market Intelligence)


Banks’ Response to Rising Rates & Liquidity Concerns

Tourism boom gives hope to Japanese regional banks

Some regional banks in Japan are seeing hope in a surge intourism.

Japan eased tourist visa requirements in 2013 to boosteconomic growth, and by 2015, the annual tally of foreigners visiting the countrynearly doubled to 19.74 million from the year the rule change took place,mostly driven by tourists from China, Taiwan and South Korea, according togovernment data. In the first three months of 2016, arrivals in Japan climbed39.3% year over year, with those from the three neighboring countriesaccounting for more than 60% of the total.

The tourism boom is creating business for Japanese banksunder pressure to survive declining local economies.

Hokkaido BankLtd., a unit of HokuhokuFinancial Group Inc., in March signed four agreements forcooperation with as many regional governments in areas including tourism. Inthe following month, the lender, based in its namesake prefecture, one of themost popular tourist destinations in Japan, inked similar pacts with anotherthree municipalities.

While details for the partnerships are still being workedout, the lender has already benefitted from efforts to reinvigorate its homemarket of Hokkaido. Over the past two years, the bank has financed projects toupgrade buildings and transportation infrastructure. Also, Hokkaido Bankarranged a ¥1.45 billion syndicated loan to the operator of a ferry linkingHokkaido and two other small islands to help the company to buy a new ship.

"We have seen positive effects on the economy," aHokkaido Bank spokesman said.

On the other hand, Bankof Iwate Ltd., which targets the second-biggest prefecture in Japanbehind Hokkaido Bank, has signed six cooperation agreements with sevenmunicipalities since the start of 2016.

"Regional banks have pursued symbiotic relationshipswith communities in their local areas," said Shinya Furue, an analyst atNorinchukin Research Institute. "Inbound tourism matters in this context."

DevelopmentBank of Japan Inc. has been providing support for the tourismindustry as well. The state-owned lender formed a fund in 2014 with a governmentagency and a property fund management firm to offer low-rate loans for thesector.

The fund then created four sub-financing vehicles withregional banks to aid tourism projects, such as revamping traditional houses inhistorical areas and old hotels in popular tourist spots.

The emergence of tourism as a fast-growing industry couldbreathe life into Japan's stagnant economy.

The influx of foreign visitors contributed ¥10.6 trillion toJapan's GDP while creating 630,000 jobs in 2015, according to an estimate byHiromasa Matsuura, an economist at Mizuho Research Institute. Because effectsof growth in tourism tend to show after a lag of several months, it will likelycontinue to give a boost to the Japanese economy through 2016, Matsuura said.

Before the visa rule relaxation in 2013, Japan had been waryabout developing tourism aggressively because of concerns about illegalimmigrants. The tourism industry still accounted for just 2.3% of Japan's GDPin 2015, according to government data.

But with the way things are going now, unless Asianeconomies slow drastically, that share can increase substantially. And that wouldbe a welcome development for banks desperate for growth.

"It would depend on transportation and how eachcommunity 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 wasequivalent to ¥108.84.