Japanese regional banks scale back in China and turn to Southeast Asia and India

Japanese regional banks are scaling back operations in China and redirecting expansion to Southeast Asia and India, a trend driven by rising labour costs, regulatory risks and retreating Japanese manufacturers. A Regional Banks Association report covering 61 lenders found overseas China locations fell from 50 in April 2021 to 40 by end-March, while major banks cut China lending sharply (SMBC -40% over five years; MUFG -20%; Mizuho >30%). The shift is reducing Japanese banking exposure to China and boosting activity in markets like Singapore, Thailand, Vietnam and India, which could reweight regional growth opportunities for Japanese financials and exporters and influence market sentiment toward Japan-linked assets.