Bank of Nagoya is navigating Japan’s changing financial landscape with a focus on regional industry, digital advancement, and long-term business support. The company is strengthening ties with manufacturers, fostering new investment, and expanding services designed to help local enterprises grow through a period of economic transition.
First, I’d like to begin by asking about the impact of recent changes to Japan’s financial system. The year 2025 has already proven to be a pivotal time for the banking sector. Most notably, the Bank of Japan has finally ended its negative interest rate policy. This marks a significant shift not only for the Japanese economy as a whole but especially for financial institutions such as city and regional banks. As a regional bank deeply engaged in lending to small and medium-sized enterprises (SMEs) and managing a variety of retail deposit products, how has this change in monetary policy impacted Bank of Nagoya’s financial operations and overall business model?
As you rightly pointed out, the shift in policy interest rates has had a tremendously positive impact on the banking sector as a whole, and particularly for regional banks like ours. For a long time, Japan operated under an ultra-low or even negative interest rate environment. In effect, this denied the value of pricing. When price signals are suppressed, no matter how much effort one puts in, that effort cannot be reflected in pricing. From a business perspective, that creates a fundamentally challenging environment.
This issue isn’t unique to banking. For more than 30 years, Japan has struggled with deflation, and countless businesses, not just financial institutions, have been affected. Deflation creates a climate where it’s extremely difficult for innovation or operational improvements to translate into tangible financial returns.
Now, Japan is slowly transitioning from this prolonged deflation into a moderate inflationary environment. I see this as a significant opportunity. In an economy where pricing mechanisms work as they should, any efforts made to transform and innovate will eventually lead to returns. That’s the kind of economy Japan is now finally entering.
At Bank of Nagoya, we view this as a major turning point, not just for us as a financial institution but also for our customers. For our clients as well, this is a time to pursue bold investments and take advantage of the financial opportunities that come with change. We are excited to support them in this new chapter.
Aichi Prefecture, where we are headquartered, is the heart of Japan’s manufacturing industry. It is a region powered by technological innovation, evolving manufacturing processes, and a deeply rooted passion for craftsmanship. I believe this combination of technique and emotion gives this region the potential to genuinely influence the world. We are fully committed to walking alongside these businesses and playing our role in enabling the next wave of Japanese industry.
Aichi remains a leader in manufacturing and technological innovation in Japan. We’ve also seen an impressive increase in inbound foreign direct investment (FDI). In 2023, FDI into Japan reached 5.3 trillion yen, and April of this year marked a new monthly record. Given this upward trend, what role do you see regional banks like Bank of Nagoya playing in attracting and supporting foreign investment into local economies?
We welcome the rise in foreign investment not only as a positive trend for our bank but as a highly encouraging development for the entire region. Historically, this área centered around the automotive industry, has always been export-oriented and globally connected. Consequently, SMEs in our region have deeper relationships with overseas markets than perhaps anywhere else in Japan.
Many of the SME leaders we work with are constantly traveling around the world, managing global operations, and forming international partnerships. As a regional bank, we are connected to the world through our customers, and that’s something we’re very proud of.
However, until now, most of the activity has been outbound from Japan to the rest of the world. We haven’t had as much inbound engagement from international players. So if today’s conversation can help open doors and create new connections between global investors and our region, I would be absolutely delighted.
Nagoya Castle General Administration Office ©
As Japan continues to open its economy to global players, financial institutions too must evolve. One of the most critical areas of transformation is digitalization. Of course, digital transformation (DX) is vital for internal efficiency, but it also plays a key role in improving how banks engage with customers. How is Bank of Nagoya approaching digitalization, and what kind of value do you believe it will create going forward?
Digital transformation is indispensable for improving internal efficiency and productivity. From an operational standpoint, leveraging DX is essential for streamlining workflows, reducing time-intensive tasks, and boosting the overall performance of the organization. That’s one of the primary reasons we prioritize DX internally.
Externally, DX allows us to strengthen our relationships with customers. By harnessing customer data more effectively and responding in real time, we can deliver financial services with far greater speed and precision. In this way, digitalization contributes directly to improving Japan’s overall productivity, not just in banking, but across industries.
That said, allow me to introduce a paradox. While digital transformation is crucial, I also believe that face-to-face communication, the human element, remains equally important. In fact, it forms the very foundation of Japan’s world-class manufacturing capabilities, particularly here in Aichi.
Take the automotive industry, for instance. A single vehicle is made from approximately 30,000 individual parts. Coordinating the production of so many components requires collaboration, innovation, and mutual understanding that can’t always be captured by digital systems or AI alone. AI can learn from the past, but it can’t foresee the future.
That’s why human interaction direct dialogue, person-to-person exchange leads to new ideas and solutions that didn’t exist before. It’s through this kind of engagement that breakthrough manufacturing methods and novel components are born. I would argue that this is one of Japan’s key strengths.
So while we will absolutely continue to deepen our digital capabilities, we will also remain firmly committed to traditional face-to-face interactions. By blending both approaches, we aim to support high-quality manufacturing and serve as a bridge between financial support and industrial innovation.
Your emphasis on people and face-to-face relationships is especially relevant in the context of Japan’s demographic trends. Many SMEs are currently facing succession challenges, and more than a million business owners reportedly have no formal succession plans. Nagoya Capital Partners, your investment subsidiary, has taken a unique role in addressing this issue. Can you elaborate on its mission and impact?
Yes. In response to deregulation, we acted quickly to establish Nagoya Capital Partners, our investment-focused subsidiary. Traditionally, banks could only support businesses through lending, what you might call “debt-based support.” But with our investment arm, we can now provide equity-based support as well.
This means we can go beyond simply extending loans. We can take a direct role in helping businesses through investments, including sending experienced personnel to serve as directors or advisors. By doing so, we’ve been able to deliver substantial results and offer a more hands-on form of business support.
Representative of Nagoya Capital Partners: Nagoya Capital Partners was established in April 2020. Just two months later, in June, we launched a dedicated Business Succession Fund with a total value of ¥4 billion. To date, we’ve invested in 11 companies, and two of those have already successfully exited via MBOs.
Our primary goal is to ensure continuity. Even when ownership changes, our focus is on preserving the corporate identity and business operations of these firms. In some cases, we are also actively helping businesses grow—for example, we’re currently working with a group of electrical engineering companies to pursue a roll-up strategy aimed at a public listing.
We believe this kind of approach, combining business continuity with strategic expansion, is uniquely well-suited to a manufacturing-driven region like ours.
Let’s talk about your medium-to-long-term business goals. One of your core objectives is to grow consolidated profits to ¥20 billion by 2030. You’ve also committed to increasing ESG-related financing to over ¥500 billion by the same year. What are the main strategies in place to achieve these targets?
As I mentioned earlier, the current environment, marked by a shift away from negative interest rates, is a clear opportunity. We’re finally in a world where capital has value again. This alone creates a strong foundation for increasing profits, and we’re very optimistic.
There are essentially two ways to grow profits: one is to increase the top line, and the other is to reduce costs. During the deflationary years, cost-cutting was the dominant strategy, not just for banks but for most companies. Many regional banks chose to downsize by closing branches and reducing staff.
Bank of Nagoya took a different approach. We did not reduce our branch network, nor did we significantly cut staff. Instead, we focused on expanding our revenue streams.
Traditionally, a bank’s income was centered on lending activities. But we work with roughly 30,000 SMEs. We saw an opportunity to go beyond lending and shift to a solution-based business model—one where we support our clients with advisory services, business matching, succession planning, and other forms of added value.
This shift began not recently, but eight years ago when I first became President. Since then, we have steadily expanded our non-lending business domains, and today that effort is bearing fruit. With interest rates now rising, we are seeing a synergy where both volume and pricing power contribute to growth.
On the ESG front, you mentioned a goal of reaching ¥500 billion in ESG-related financing. How are you approaching this?
We’re working to integrate ESG into all aspects of our operations. One area of focus is “transition finance.” As manufacturers in our region move toward carbon neutrality, they’ll need to invest in new technologies and facilities. That means significant capital investment, and we see ourselves playing a key role in providing the necessary financing to support this transformation.
Beyond supporting existing businesses in their transitions, Aichi is also seeing the emergence of many startups, particularly in areas like green energy and advanced manufacturing. What role is Bank of Nagoya playing in supporting this next generation of innovation?
There are currently two major startup hubs in Nagoya. The first is “Nagono Campus”—named after Nagoya’s historical name “Nagono.” We’ve been involved there since its founding, providing on-site advisors to assist entrepreneurs with their challenges.
The second is “STATION Ai,” launched by Aichi Prefecture. We have our own dedicated space there as well and are actively engaged in supporting startups. One of our key roles is to act as a bridge between these startups and more traditional SMEs—to help foster collaboration between innovation and experience.
As President of Bank of Nagoya, you’re leading the organization into its 76th year. Looking ahead to the bank’s 80th anniversary, what goals or aspirations would you like to have achieved by then?
In terms of size, we’re currently the fifth-largest regional bank in the Tokai region. But when it comes to profitability, we’re already among the top performers. To me, that speaks volumes—because size alone doesn’t define a bank’s value.
My aspiration is for Bank of Nagoya to be the most trusted and valued financial institution in our region. Ideally, we’d also like to lead in profitability. We serve over 30,000 corporate clients, which is quite large even among regional banks. That’s a reflection of being based in Aichi, a powerhouse in manufacturing.
Leveraging that strength, we aim to be a leading regional bank—not just in name, but in substance. One that genuinely contributes to the economic development of this region.
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