In new stimulus package, Japan to offer subsidies for regional banks which merge

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

  
A man walks past the Bank of Japan (BOJ) building in Tokyo, Japan, March 15, 2016. Image used for illustrative purpose.

A man walks past the Bank of Japan (BOJ) building in Tokyo, Japan, March 15, 2016. Image used for illustrative purpose.

REUTERS/Toru Hanai

TOKYO - 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 stimulus 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 pledged to support rural areas and their ailing lenders which have suffered from thin margins amid ultra-low interest rates and a dwindling population base.

The new measures would follow the Bank of Japan's 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 Prime Minister Yoshihide Suga's cabinet on Dec. 8.

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

Some ruling party lawmakers have called for a third extra budget of up to 40 trillion yen ($385 billion) to fund the new package, which would follow two packages deployed this year worth a combined $2.2 trillion.

While the previous packages responded to the immediate hit from the pandemic, the upcoming stimulus is expected to focus more on efforts to cope with a 'new normal' in the post-COVID era. ($1 = 103.9200 yen)

(Writing by Tetsushi Kajimoto; Editing by Chang-Ran Kim and Edwina Gibbs) ((tetsushi.kajimoto@thomsonreuters.com;))

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