Regional Banks

As interest rates rise, firms buckle. Put July’s run of regional-bank losses beside the collapse of Zentoshin, an Osaka payment agent, and the story writes itself. It is half wrong. The Bank of Japan did raise its policy rate to 1.00% in June, the highest since 1995, but stripped of inflation the real rate is still deeply negative (Dai-ichi Life Research Institute). A rate of 1% is not, in itself, crushing borrowers. What changed is not the level of rates but the machinery that ran beneath them. ...

Few people had heard of the company that went bankrupt on 6 July. Zentoshin, a credit-card settlement agent in Osaka, was no household name. Yet it sat beneath the cash flow of restaurants and the night-time economy across Japan, working as their plumbing. Its liabilities came to about ¥125.9bn (roughly $790m), the largest corporate failure of the year and the first above ¥100bn since Drone Net in December 2025 (TDB, TSR). Its collapse pulled a scatter of regional banks down with it. ...

Part 1 was the demographic case. Part 2 was the regulatory and activist picture. This is the spreadsheet. Below book, almost everywhere The Tokyo Stock Exchange’s 2023 directive to companies trading persistently below book value landed on the banking sector like an indictment. Of 79 Japanese banks surveyed by S&P Global, just four had a price-to-book ratio above 1. Half of all Topix stocks still trade below book value, the same proportion as twenty years ago, compared with 3% of the S&P 500. ...

The previous article established the diagnosis. Ninety-nine listed banks, a population shrinking by 900,000 a year, deposit growth at a crawl, non-interest income effectively negative after stripping out equity sales. The patient is stable but deteriorating. This article is about who is reaching for the scalpel. The regulatory starting gun In 2020, the Japan Fair Trade Commission lifted the antimonopoly barriers to same-prefecture bank mergers. The exemption runs for ten years. The clock expires in 2030. ...

When an elderly woman dies in Akita Prefecture, her savings do not stay in Akita. Her children live in Tokyo or Sendai. The inheritance closes a regional bank account and opens one at MUFG, or flows into a NISA brokerage account, or both. Multiply this by 912,000 – last year’s record natural population decline – and you have the regional banking problem in a single transaction. Japan has 99 listed regional banks. Sixty-two tier-one, thirty-seven tier-two. It has five city banks. The country’s population fell by 908,574 Japanese nationals in 2024, the largest annual decline since records began. Only Tokyo grew. All other 46 prefectures shrank. Akita lost 1.91%, Aomori 1.72%, Kochi 1.71%. In Akita, more than 40% of residents are already over 65. By 2050, its population is projected to be 60% of what it is today. ...