Japan's big banks weigh financing arms makers in break with past
According to Nikkei Asia, the three large Japanese banking groups led by Mitsubishi UFJ, Mizuho and SMBC are seriously weighing the loosening of long-standing ethical restrictions to extend credit to defence-industry companies. The discussion comes as banks face reform pressure following Japan's decision to raise defence spending to 3 percent of GDP. The move would mark a significant break with a half-century post-war banking tradition.
According to documents cited by Nikkei Asia, the three banks have initiated a review of internal investment-committee directives that exclude the defence sector. A source from Mitsubishi UFJ's management said: "In a period where societal expectations are shifting, the sectoral exclusion policy is being put through a holistic review." No new policy has been formally announced.
Japan has committed to raising defence spending to 3 percent of GDP by fiscal 2027. The target envisages domestic players such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries and IHI taking on projects that require substantial capital investment. The financing needs for production expansion in Kobe, Nagoya and Hiroshima are estimated at around 4 trillion yen of private-sector credit.
Finance Minister Katsunobu Kato said last month at the US-Japan defence meeting framework that the government was seeking "constructive dialogue" with banks on loosening their sectoral restrictions. ESG investors, for their part, have voiced concerns.
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