The Bank of Japan (BOJ) announced on November 26 that 43 financial institutions are qualified to receive loans under a new scheme targeting activities aimed at combating climate change, as reported by Reuters on the same day. BOJ rolled out this program in July to provide zero-interest loans that can be renewed until 2030 to banks that boost green and sustainable loans. Later, on September 22, the Japanese central bank started accepting applications from financial institutions seeking to join the plan, from which the 43 qualified lenders were generated. These banks, including Japan’s three megabanks, will receive loans twice a year after BOJ’s first auction for the loans on December 23.

The green loan scheme indicates Japan’s central bank is shifting from crisis mode towards tackling long-term structural problems such as climate change, citing Capital Economics Senior Japan Economist Marcel Thieliant. The country adopted recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) in May 2019 to develop disclosure rules on climate-related financial risks for enterprises, banks, and investors. According to BOJ, the banks applying for the zero-interest climate loan need to reveal targets and actual results on green investments and loans, as well as the actions they are taking to comply with the disclosure rules by the TCFD. In the move to develop green finance, Japan issued green bonds worth USD10.66bn in the fiscal year 2020 ending in March 2021, a surge from the issuance of USD4.17bn and 7.22bn in the fiscal year 2018 and 2019.

Sources:

https://www.reuters.com/business/cop/boj-says-43-lenders-qualified-tap-its-climate-loan-scheme-2021-11-26/

https://www.reuters.com/business/sustainable-business/boj-says-start-accepting-bank-applications-climate-scheme-2021-09-22/

https://www.reuters.com/business/sustainable-business/japan-promote-green-finance-with-common-platform-scenario-analyses-2021-09-01/

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/japan-sets-sights-on-another-record-year-of-green-bond-issuance-62701865