A tiny bank runs dry of borrowers as population shrinks in Japan

Wakkanai Shinkin Bank in north Hokkaido has seen the number of residents halve from its 1964 peak. Read more at straitstimes.com.

TOKYO – Many Japanese banks in the countryside are struggling due to a shrinking population, but at a tiny credit union in the northernmost tip of the country, the situation is extreme.

Wakkanai Shinkin Bank serves customers in the city of the same name in northern Hokkaido. Once a bustling fishing hub, it has seen the number of residents roughly halve from its peak in 1964. Loan demand has plummeted, and the bank has turned to investing in Japanese government bonds to eke out a profit, a strategy that is now coming into question.  

Led by its longstanding President Masatoshi Masuda, 72, who grew up in the area, the lender has been engaging with local businesses and community to nurture start-ups and turn around troubled ones. But the hard truth is, there just are not enough borrowers. 

“No business can survive without people,” Mr Masuda said in an interview. “If you ask about the future of Wakkanai Shinkin, it’s tied to the fall in the population and the number of businesses.” 

It is a challenge shared by many other rural lenders in Japan. Years of rock-bottom borrowing costs failed to lift local economies out of their deepening funk. Now, even with the Bank of Japan raising interest rates, credit demand is too weak to prop up profits. 

Wakkanai Shinkin is a stark example. While the lender provides nearly half of the loans in its region, the amount makes up just 16 per cent of deposits – far below the national average of 50 per cent for Japan’s around 250 credit unions, known as “shinkin”. It funnels most of the rest into Japanese government bonds (JGB), which are now losing their value as interest rates climb.