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Japan government banks to aid firms to prepare for overseas downturn - document

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By Reuters

By Takashi Umekawa and Takaya Yamaguchi

TOKYO (Reuters) – Japan will provide financing to the nation’s companies for overseas investment to help them diversify production to fend off a possible downturn overseas, according to a document seen by Reuters on Thursday.

The loans and other financing, through three government lenders, are part of Prime Minister Shinzo Abe’s efforts to shore up the world’s third-biggest economy and its companies as concerns grow over such risks as U.S.-China trade tensions, turbulent protests in Hong Kong and Brexit, said two people briefed on the plans.

“To prepare for the case of downside economic risks from overseas becoming apparent, the policy will stimulate investment for growth by supporting Japanese companies’ overseas development through the overhaul of their global value chains,” the document says.

Specifically, the lending aims to promote mergers and acquisitions by Japanese companies to facilitate the international diversification of their manufacturing, as well as for infrastructure such as next-generation 5G mobile networks, it says.

The plan is to be completed in December, said the sources, though they had not been briefed on any planned funding amounts.

The scheme is to deploy the Japan Bank for International Cooperation [JBIC.UL], the Development Bank of Japan Inc [DBJPN.UL] and the Japan International Cooperation Agency [JICA.UL], the document shows.

A JBIC spokeswomen declined to comment. DBJ and JICA, and the government’s Cabinet Office, which is compiling the measures, could not immediately be reached.

Japan’s economy is showing increasing signs of sputtering, as clouds gather over global demand and domestic consumption stagnates. Retail sales sank the fastest in 4-1/2 years in October, as a sales tax hike prompted consumers to cut spending, government data showed on Thursday.

Politicians are clamouring for Abe to spend as much as 10 trillion yen (71.74 billion pounds) in a planned economic package for disaster relief and measures to help the economy stave off heightening global risks. The corporate-financing measures will be part of the government package, the sources said.

Bank of Japan Governor Haruhiko Kuroda on Thursday endorsed the government’s planned spending, even though “fiscal space for Japanese government is somewhat limited”.

(Reporting by Takashi Umekawa and Takaya Yamaguchi; Editing by William Mallard)