Financial Services Agency reviews defense-related financing by domestic lenders

2026-08-12

Japan's Financial Services Agency has begun assessing investments and loans to the defense industry by major domestic financial institutions. As the government positions the defense industry as a strategic sector from a security standpoint, it will review funding conditions and each company's operating rules.

Hearing also from major life insurers

The agency has started hearing from the three megabanks, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corp and Mizuho Bank, as well as major life insurers including Nippon Life Insurance and Dai-ichi Life Insurance. While practices differ by institution, it will confirm the amounts and number of deals actually directed to the defense industry.

Drawing the line on investments and loans

It will also examine whether there are operational restriction rules for projects related to weapons and arms. In recent years, dual-use technological advances have been rapid not only in small unmanned aircraft, or drones, but also in fields such as artificial intelligence and space. Projects not prohibited by international treaties are handled through individual lending decisions.

Government-backed lenders also review policy

The government has drawn up a plan to invest more than 370 trillion yen in total by fiscal 2040 across 17 strategic sectors, including defense and AI. At a meeting with the Japan Bankers Association and government-affiliated financial institutions, Defense Minister Shinjiro Koizumi urged investment and lending with defense-related startups in mind.

Government-affiliated financial institutions are also moving to review their responses. In May, the Development Bank of Japan effectively lifted its ban on investments and loans to domestic weapons manufacturers, revising its internal operating rule from 'handle with caution' to 'can be considered.'

Caution remains strong among major private banks. In April, the government revised the Three Principles on Transfer of Defense Equipment and Technology and related operational guidelines, making it possible to export defense equipment with lethal capabilities. Even so, while major banks have shown understanding for funding defense-related sectors, they are wary of friction with overseas markets, including China, where they have borrowers.

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