A bank in a suburb of Osaka is investing in local development and setting a growth target for its home prefecture, offering a new model for how banks could operate under Japanese Prime Minister Yoshihide Suga’s revitalization drive.
The efforts by Nanto Bank, based in Japan’s ancient capital of Nara, come as Suga calls for regional banks to boost local economies reeling from an aging and dwindling population.
Nara’s tourism industry, for instance, is struggling to draw money from visitors, who typically flock to its World Heritage temples, but do not stay overnight.
The COVID-19 pandemic has added pain for retailers, with Japan closing its doors to most foreign tourists.
Knowing the bank’s fate could be tied to economy of Nara Prefecture, Nanto last year set an ambitious target to boost the prefecture’s GDP by 10 percent over a decade.
“We asked ourselves whether regional banks would be around a decade from now and concluded that without a vibrant regional economy, we can’t stay relevant,” Nanto president Takashi Hashimoto said.
Helping boost tourism infrastructure was a first step, he said.
“We want to turn Nara into a place to stay for a night, rather than a place where people just stop by,” Hashimoto said
Nanto invested in a ￥1.5 billion (US$14.4 million) fund in projects that rehabilitate ancient neighborhoods and turn centuries-old buildings into boutique hotels.
One such example is Maruto Shoyu, a three-centuries-old soy sauce brewery-turned-hotel that in September opened near one of Japan’s oldest shrines worshiping Mount Miwa.
“This area may be underdeveloped, but I took that as a positive because visitors can enjoy Japan’s old, largely unscathed landscape,” Maruto owner Hiroyuki Kimura said.
Before the pandemic, Nara was one of Japan’s most popular tourist destinations and home to renowned sites such as the Great Buddha, built when the area was the Japanese capital during the eighth century.
However, the prefecture has the fewest number of hotel rooms in Japan, and tourists stay in neighboring big cities. Nanto has worked with the prefecture government and firms to create demand on its home turf.
After more than a decade of convincing, JW Marriott this year opened a hotel in Nara, becoming the first luxury foreign brand to set foot in the prefecture. About 14 more hotels have this year opened or plan to do so by 2022, prefecture officials say.
However, achieving Nanto’s GDP target, would not be easy with a tourism-reliant economy crippled by the pandemic.
There is also no guarantee that more tourists would bring in more revenue. Nanto’s investment in the rehabilitation fund is a drop in the ocean compared with total loans to corporate borrowers exceeding ￥5 trillion.
Although Nanto holds a 50 percent market share in Nara, it has for more than a decade failed to generate enough profits from core lending and fee businesses to offset costs.
That means that Nanto must accompany investment with cost cuts, including locally unpopular branch closures.
“The prime minister is prodding regional banks to become stronger,” Hashimoto said. “We’ve been trying to do that for some time. We can’t help the local economy unless we stay lean and mean.”
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