Bloomberg News

Japan Offers $43 Billion Credit to Megabanks for M&A Abroad

October 05, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 5 (Bloomberg) -- Japan’s three biggest banks received a combined $43 billion credit line from the government to help finance domestic companies’ overseas takeovers as businesses seek to counter the strong yen.

The Japan Bank for International Cooperation, known as JBIC, is offering a $15 billion credit line to Mitsubishi UFJ Financial Group Inc.’s banking unit, the state-run lender said in a statement on its website today. Units of Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. each received $14 billion in credit under the pact.

Prime Minister Yoshihiko Noda is under pressure to help Japanese companies weather the yen’s 11 percent rise against the dollar in the past six months, which has hampered the nation’s recovery from a record earthquake in March. The deal is aimed at helping banks to procure dollars and offer loans to companies planning acquisitions abroad, the statement said.

“This is a preparatory measure for any future event that may make it difficult for Japanese banks to procure the dollars in the market,” said Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG. “Still, Japan’s government needs to swiftly reconstruct the earthquake-damaged nation and push domestic economic growth.”

The yen, which has gained against the dollar as a haven amid concerns the European debt crisis will worsen, traded at 76.73 per dollar as of 3:57 p.m. in Tokyo.

$100 Billion Program

The credit lines are part of a government program unveiled in August to release $100 billion of foreign-exchange reserves to the state-owned lender to fund exporters and spur purchases overseas, the statement said.

Katsunori Nagayasu, head of the Japanese Bankers Association, said last month that persistent gains in the yen might push companies to shift production and research abroad to control currency-related costs.

Japanese companies have announced overseas takeovers totaling $56.7 billion so far this year, the highest in three years, according to data compiled by Bloomberg.

JBIC was established by the government to promote overseas development and acquisition of natural resources, improve Japanese companies’ competitiveness, finance business abroad and respond to global financial disruptions, according to its website.

--With assistance from Takako Taniguchi in Tokyo. Editors: Russell Ward, James Gunsalus

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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