Japan to Offer Regional Banks Incentives to Merge

Japan will offer subsidies to regional banks that merge with rivals as part of plans to encourage economic growth in regional areas, a draft of a stimulus package seen by Reuters showed on Friday.

The proposed package also calls for a review of regulations that govern the scope of banks businesses, with an eye to spurring digitalisation.

Prime Minister Yoshihide Suga has promised to support rural areas and their ailing lenders, which have suffered from thin margins amid ultralow interest rates and a dwindling population base.

The new measures would follow a Bank of Japan announcement last month that it will set up a scheme to pay interest of 0.1 to regional banks that consolidate or cut costs.

The stimulus package is expected to be finalised and approved by Sugas cabinet on Dec. 8.

The draft made no mention of the size of stimulus or its source of funding.

Some ruling party lawmakers have called for a third extra budget of up to 30 trillion yen 290 billion to fund the new package, which would follow two others deployed this year worth a combined 2.2 trillion.

The latest package, seen focusing more on efforts to cope with the new normal in the postCOVID era, would feature at least three publicsector investment funds, including one to promote green investment and another to push university research.

Employees of publicsector funds are usually paid far less than their counterparts at privatesector funds. That means the former have less incentive to be successful…

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