Feature Article 2023 JBIC Act Amendment: Three Key Points (1)
Given the recent international political and economic landscape, more and more companies are investing to strengthen their supply chains. With the aim of ensuring stable procurement within the international division of labor framework, JBIC supports the entire supply chain, including foreign companies and overseas subsidiaries.
New loans for eligible foreign companies
Can now support foreign companies that are vital to Japanese company supply chains and industry bases
The international division of labor for industry bases and supply chains of semiconductors, storage batteries and other goods and technologies indispensable to daily life has now become highly developed. In light of the increasingly complex international landscape, foreign companies included in the supply chains and industry infrastructure (i.e., eligible foreign companies) are now eligible for loans (specific eligibility is designated by a Ministry of Finance ordinance).
For a loan to an eligible foreign company to be considered, a request for such support must be made by a Japanese company (including overseas Japanese affiliates). The Japanese company must have supply chain ties with the eligible foreign company, or a shared use of business bases.
Moreover, as in normal loans, it will be confirmed that environmental and social considerations are being taken into account, as outlined in the JBIC Guidelines for Confirmation of Environmental and Social Considerations.
Eligibility for the new eligible foreign company loans is dependent on them providing “important goods,” “important technologies,” or “bases necessary for global business operations” to Japanese companies. Specifically, the following operations are designated as eligible by the Ministry of Finance ordinance.
Of the following operations, those necessary for enhancing the resilience of the supply chain for goods procured by Japanese or Japanese-affiliated companies:
●Development of important resources for Japan
●Manufacturing of equipment and other items necessary to generate electricity from renewable energy
●Manufacturing of rechargeable batteries
●Manufacturing of components and accessories of ships and aircraft
●Development and manufacturing of medical devices
●Development and manufacturing of pharmaceuticals
●Manufacturing of motors
●Manufacturing of semiconductors, including the raw materials and equipment necessary for the manufacturing
●Development and manufacturing of fertilizers, agricultural instruments, and other goods necessary for food production, including agriculture
●Manufacturing of low-carbon materials
Of the following operations, those necessary for facilitating the provision of technologies utilized by Japanese and Japanese-affiliated companies:
●Development of artificial intelligence-related technologies
●Development of technologies related to quantum computers and other equipment that harness the quantum property
●Development of biotechnology
●Development of blockchain technology
Of the following operations, those necessary for global business activities by Japanese and Japanese-affiliated companies:
●Development of bases for power generation, transmission, etc., necessary to provide electricity from renewable energy
●Development of bases for utilizing information and communication technology (including launching, tracking, and controlling of communication satellites)
●Medical care
Enhancing the resilience of the semiconductor supply chain
Segmentation of semiconductor manufacturing has led to global supply chains. In the supply chains, there are many companies with advanced technologies that have a monopoly position in one part of the process. Should the production of a company in another country stop for some reason, manufacturing by Japanese companies will also come to a halt. Having stable production by overseas companies in their supply chains is thus crucial for Japanese companies. That is why JBIC will directly support foreign companies when requested by their Japanese counterparts. This not only protects the production of relevant Japanese companies, but also helps meet demand in Japan and the world by maintaining the global supply of semiconductors.
Seizing business opportunities in the EV supply chain
Demand for lithium-ion batteries is growing rapidly with the spread of electric vehicles (EVs). Japan’s major electronics manufacturers are exclusive suppliers to the world’s top EV manufacturers, but competition is fierce. In order to improve the quality and environmental friendliness of their products, collaboration with companies from other countries is essential, starting with the mining of minerals for these batteries. JBIC will provide integrated support for Japanese companies and their foreign partners to secure their supply chains for vital materials.
Procurement and use of resources abroad now eligible for loans
In addition to the imports of resources and other strategically important goods, loans are now possible for their procurement and use abroad
Up to now, JBIC’s import loans have been provided for resources and other strategically important goods imported to Japan. However, in the global operations of Japanese companies there has been an increasing number of cases in recent years in which resources procured overseas are received by Japanese affiliates located overseas, where they are then manufactured into products and marketed.
In response, import loans have now become available for cases in which Japanese companies overseas obtain resources from foreign companies (the same applies when products are manufactured and marketed using resources procured overseas).
Eligible resources include: oil, petroleum gas, LNG, coal, uranium, metallic ore, metals, mineral phosphate, fluorite, salt, wood, wood chips, pulp, fuels derived from biomass, hydrogen, and fuel ammonia.
Expanding support to strengthen supply chains for Japanese companies
More flexible support for Japanese companies in funding their overseas operations to strengthen their supply chains
The supply chains of Japanese companies have extended across national borders. Considering this, JBIC will provide loans to fund the operations of Japanese companies’ overseas subsidiaries.
For companies other than mid-tier enterprises (MTEs) and small and medium-sized enterprises (SMEs), JBIC has been providing loans for resources, M&A, and infrastructure (two-step loans). But now overseas investment loans to Japanese companies for overseas business operations to strengthen supply chain resilience are also possible. JBIC is now able to support the overseas supply chains of Japanese companies from upstream to downstream.
Existing domestic loans to MTEs and SMEs remain unchanged.
Small and medium-sized enterprise (SME): In principle, a company or individual with capital of 300 million yen or less or with up to 300 regular employees (for the manufacturing industry) (Definition varies by industry, and some industries are excluded.)
Mid-tier enterprise (MTE): A company with capital of under 1 billion yen (Both include listed companies, but exclude consolidated subsidiaries of large companies.)
