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3 Minutes to Read by 3 Minutes to Read by 3 Minutes to Read by 3 (Reuters) – TOKYO, July 14 (Reuters) – According to minutes of the deliberations, the Bank of Japan’s plan to incentivize regional bank mergers was intended to show that it was working alongside the government to address difficulties in the country’s banking sector. In November, the BOJ announced a scheme that pays 0.1 percent interest to regional banks that combine or take efforts to improve profitability, a move that opponents viewed as a hazardous departure from industrial policy. The decision came months after Prime Minister Yoshihide Suga committed to focus on regional bank mergers as a strategy to revitalize local economies at a regular BOJ meeting on Nov. 10. According to the minutes of the meeting acquired by Reuters on Tuesday, deputy governor Masazumi Wakatabe expressed concern that the system could be criticized as unfairly subsidizing financial organizations. According to the minutes, however, another deputy governor, Masayoshi Amamiya, backed the plan, saying it would be a “strong show of resolve” that the BOJ was working closely with the government to keep Japan’s banking sector stable. “Now, more than ever, we need to work closely with the administration,” Amamiya was reported as saying. The initiative, which was implemented in March, has been hailed by regional banks as a way to compensate for the loss of earnings caused by low interest rates. “We’re grateful,” said Hitoshi Umeda, president of Chiba Kogyo Bank, a regional institution. “After such a lengthy period of low interest rates, the traditional lending business is reaching its limit.” However, critics warn that by matching its policies too closely with the government’s aims, the BOJ risks jeopardizing its independence from political intervention. The BOJ intends to introduce a new scheme to subsidize efforts to tackle climate change, which will coincide with Suga’s pledge to make Japan carbon neutral by 2050. “The new BOJ administration appears to place a great importance on government coordination,” said Kunio Okina, an academic at Otsuma Women’s University. “The fact that inflation has fallen short of expectations may be pushing several central banks, including the Bank of Japan, into areas that are deemed outside the scope of monetary policy.” (Takahiko Wada and Leika Kihara contributed reporting; Jacqueline Wong edited the piece.)/nRead More

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