Japan's life insurers, which make up a major lending sector, have sharply cut their loans to small-capital firms in an effort to reduce asset management risks, a press report said yesterday.
Lending by Japan's 10 leading life insurance companies to medium and small enterprises in the year to March fell 9.1 percent from the preceding year to Japanese yen 3.92 trillion (US$32.5 billion), the major business daily Nihon Keizai Shimbun said.
The number of medium and small enterprises, which received loans from the insurers, also fell 14.6 percent to about 7,600, the daily added.
The insurers aim to improve their financial health by reducing asset management risks, but the stringent selection of borrowers is seen likely to dampen capital investment by small and medium-sized firms, the report said.
The government defines medium and small firms as those whose capital is Japanese yen 300 million or less for the manufacturing, mining and transporting sectors, 100 million or less for the wholesaling sector and 50 million or less for the retailing and service sectors.
Japanese life insurers lend about a quarter of assets under their management to companies and policyholders.
Their outstanding loans to domestic companies totaled about Japanese yen 47 trillion at the end of March, rivaling those of Japan's four major banking groups, the daily said.
For smaller firms having difficulty raising funds from capital markets, such as through bonds and commercial paper, loans from life insurers are the main source of long-term funding, such as capital spending, the report said.
It added that life insurers were trying to reduce loans to smaller firms, while maintaining loans to big companies with relatively low default risk.
Life insurers hope to increase corporate lending to profit from interest margins amid sluggish bond yields, the report said.
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