2018-7
Lending by Regional Financial Institutions Driven by Hometown Tax
Donation and Ensuing Prospects for Intra-regional
Industry-Government-Banking Collaboration
Takaaki Hoda

Yuichiro Kubo

Lending by Regional Financial Institutions Driven by Hometown Tax
Donation and Ensuing Prospects for Intra-regional Industry-GovernmentBanking Collaboration
Takaaki Hoda1 and Yuichiro Kubo2
Abstract
The purpose of this study is to reveal the current state of intra-regional lending by financial
institutions prompted by Hometown Tax Donation, and to explore the ensuing prospects for intraregional collaboration among businesses, governmental organizations and financial institutions. To
achieve this end, we surveyed regional financial institutions across Japan, and found that although asignificant number of financial institutions expect Hometown Tax Donation to promote industrygovernment-banking collaboration, few have actually extended loans, while many are taking a waitand-see stance. The survey also revealed that while regional financial institutions recognize that
Hometown Tax Donation can contribute to local businesses and economies, for example, throughraising local businesses’ incentives for new product development and enhancing their designing
capabilities, or through “city marketing,” they do not foresee a rise in migration/resettlement or
lending. Meanwhile, it was revealed that most regional financial institutions that extended new oradditional loans to gift providers—local businesses providing gifts in return for Hometown Tax
Donations—had comprehensive partnerships with municipalities. Thus, for Hometown Tax Donation
to contribute to regional development, collaboration between municipalities and financial institutions
is essential, and the scheme itself should be enhanced so that it would gain the confidence ofregional financial institutions.
1. Introduction
Recently, the Japanese government has been committed to regional development, and in 2014, it set
up the Headquarters of Overcoming Population Decline and Vitalizing Local Economy in Japan tooversee this initiative. Revitalizing regional economies requires intra-regional circulation of people,
products and capital. In particular, boosting profitability of local companies is imperative, and thus,
the role of regional financial institutions becomes crucial. With this in mind, the Headquarters of
Overcoming Population Decline and Vitalizing Local Economy in Japan conduct an annual monitoring
survey targeting financial institutions across Japan to assess how engaged they are in regional
development. The survey aims to understand current initiatives taken by financial institutions, who
1

Corresponding author. Associate Professor, Graduate School of Business Administration, Kobe
University. hoda@port.kobe-u.ac.jp
2

Researcher, Graduate School of Business Administration, Kobe University.

1

serve a major role in regional industries and finance, and to share exceptional cases, thereby enhancing
partnerships between municipalities and financial institutions, and advancing/reinforcing national
strategies.
The Financial Services Agency (FSA), also concerned about this issue, monitors regional financial
institutions’ revenues and activities in their annual Financial Report. The report draws attention to theneed to re-examine the sustainability of conventional business models adopted by regional financial
institutions3, while also pointing out that regional financial institutions can secure their own revenues
and help revitalize the regional economy by better understanding local companies’ businesses andproviding advice and financing that boost corporate value. The report also introduces several bestpractices.4
Based on such awareness, the FSA set the “Benchmarks for Bank’s Financial Intermediary Function”
in September 2016—diverse measures that objectively assess the effectiveness of financial institutions’intermediary functions. The first common benchmark is "to improve businesses and enhance growthcapabilities of client companies." Therefore, if client companies providing gifts in return forHometown Tax Donations are undergoing positive changes, financial institutions should be taking
notice. Another benchmark is “to commit to the local community and cultivate relationships with local
companies.” 5 This benchmark should improve if regional financial institutions are increasinglyoffering gift providers various services and advice. In other words, these common benchmarks could
improve, whether intentionally or not, if regional financial institutions are engaged with gift providers.
Reversing the perspective, Hometown Tax Donation could be regarded as a solution for regional
development if it serves to reinforce relationships between local businesses and financial institutions.
Based on such assumptions, we conducted a research targeting regional financial institutions acrossJapan on the current state of lending driven by Hometown Tax Donation, and the ensuing prospects
for industry-government-banking collaboration. It is however important to note that the scale of impact
should be discounted if changes in relationships between local gift providers and financial institutions
are driven by temporary government-controlled demand or is system-dependent.
While there are various arguments for and against the Hometown Tax Donation scheme, this report
is not intended to discuss the pros and cons of the scheme, but rather, to understand the effect it hason lending and how it is perceived by regional financial institutions. The report also makes proposals
for improving the scheme.
3

It has been pointed out that profits gained by financial institutions from their customer service businesses—theirmain source of revenue—have trended lower due to changes in the environment, e.g., a declining population and low
interest rates. Terasaki (2012) goes one step further to argue that regional financial institutions are investing surplus
funds that could not be extended as loans, in securities such as government bonds with lower yields, leading to afurther decline in loan-to-deposit ratio and rise in securities-to-deposit ratio, which in turn causes revenues todecrease and interest rate risks to increase.
4
Financial Report (2016), FSA, October 2017.
5
The benchmark includes such measures as trends in the number of local clients, the number of clients per corporate
sales representative, and average number/length of client meetings.

22. Discussions and Prior Studies regarding Hometown Tax Donation
According to the Ministry of Internal Affairs, the number of Hometown Tax Donations received in2016 was 12.71 million with the total amount reaching 284.4 billion yen. This scheme allows
individuals to donate part of their inhabitant tax to a municipality or municipalities of their choicerather than paying that amount as tax to where they reside.6 The amount donated, aside from 2,000
yen, is subject to tax deduction, effectively costing the donor only 2,000 yen.7 Furthermore, donors
generally receive reciprocal gifts from the municipality to which they made donations. The scheme
was designed in view of its vision and purposes, with the vision being to achieve sustainable regional
development, and the three purposes being: firstly, to raise taxpayers’ awareness through selecting thedestination of their donation; secondly, to function as a fund for supporting local communities; andthirdly, to promote competition among municipalities.8 On the one hand, there is some criticism
toward the scheme, including the view that it causes unnecessary transfer of tax revenue between local
communities, thereby distorting the basis of inhabitant tax, or that reciprocal gifts can be regarded as
direct purchases by municipalities using public money. In particular, there are negative views
regarding overly expensive or cashable reciprocal gifts, since their purchase is funded by tax. In
response to such criticism, the Minister of Internal Affairs and Communications released a notice inApril 2017 stating that the value of reciprocal gifts should be kept below 30% of the amount donated,
and to refrain from providing gifts that can be exchanged for cash (e.g., gift certificates or electronicmoney) or that serve as assets (e.g., electronic devices or furniture). On the other hand, there arepositive views regarding the scheme as an effective solution for regional development.
Against this backdrop, prior studies were mainly conducted with an aim to offer policy proposals
or implications for improving the scheme. Studies by Hoda and Yasui (2016) and Hashimoto andSuzuki (2016) were conducted to understand the framework and current state of Hometown Tax
Donation, sort out the key issues, and propose improvements to the scheme. Suzuki and Hashimoto(2017) argued that it is necessary to suppress the overheated competition between municipalities tooffer attractive reciprocal gifts. Other studies include Nishimura and Seta (2017), Nishimura, Ishimura
and Akai (2017) and Hoda (2016) which summarize individuals’ incentives and motives for taking
part in Hometown Tax Donation. Yet, none of these prior studies explicitly examine the effects thatthe scheme has on regional development. At a micro level, Hoda (2017) introduces cases where local
businesses were successfully fostered through Hometown Tax Donation, and Matsuzaki (2014)

6

Also applies to income tax in some cases. For details on the transfer of tax through Hometown Tax Donation, refer
to Hashimoto and Suzuki (2016).
7
There is an upper limit to the deductible amount—usually 20% of one’s inhabitant tax; however, the amount canvary depending on one’s income and income tax rate. For details, refer to the Ministry of Internal Affairs’“Hometown Tax Donation Portal Site” (Japanese only).
8
Ministry of Internal Affairs’ “Hometown Tax Donation Portal Site” (Japanese only).

3introduces the case of Kitakami Shinkin Bank (Kitakami City, Iwate Prefecture) promoting local
industry-government-banking-collaboration through Hometown Tax Donation. However, it has notbeen verified whether such developments are taking place across the country. This report examines
the extent to which the scheme is triggering industry-government-banking collaboration around Japan,
as in the case of Kitakami Shinkin Bank. If similar developments can occur on a national scale,
Hometown Tax Donation has the potential to become a solution to aforementioned issues that regional
financial institutions and rural areas are facing.
3. Research Method and Contents
We sent out the survey via postal mail to corporate sales executives of all credit unions, shinkinbanks (cooperative financial institutions serving local small- and medium-sized companies), and firstand second-tier regional banks in Japan.9 The questionnaires were sent on August 17, 2017 (to 487
institutions), receiving 165 responses by September 30. The response rate was 33.9%, with the highest
rate from shinkin banks (36.7%), followed by credit unions (35.0%), second-tier regional banks(28.5%) and first-tier regional banks (23.4%).10 These numbers suggest that shinkin banks and credit
unions have a stronger interest in this topic. Looking at the response rate by prefecture, prefectureswith response rates one or more standard deviation higher than the national average were Yamanashi,
Wakayama, Shimane, Kagawa, Tokushima, Oita, Saga and Kumamoto, while those with response rates
one or more standard deviation lower were Akita, Fukui, Saitama, Chiba, Hyogo, Ehime andKagoshima. Hometown Tax Donation often receives negative media coverage in urban areas since it
involves transfer of taxes from urban to rural areas. As such, we envisioned the response rate to belower in urban areas and higher in rural areas in support of the scheme; however this was not the case.
Among the urban areas, while the response rate was indeed low in Saitama and Chiba, it exceeded thenational average in Tokyo, Ehime and Osaka, reaching 40.5%, 40.9% and 35.0% respectively; hence
no extreme deviation was identified between urban and rural areas.
The survey consisted of 27 questions, first asking each financial institution about their current stateof lending and presence of comprehensive partnership with local municipalities, and then checking for
any initiatives related to Hometown Tax Donation and their expectations toward industry-governmentbanking collaboration resulting from the scheme. The analysis method consisted of simple tabulation,
cross tabulation and t-test. We also conducted a detailed analysis on lending associated to the schemeby classifying the financial institutions according to presence of comprehensive partnerships withmunicipalities, urban/rural areas, and institution types.

9

We excluded credit unions targeting specific business types such as doctors credit unions.

10

The breakdown of number of responses was: 97 from shinkin banks (58.7%), 41 from credit unions (24.9%), 15
from first-tier regional banks (9.1%) and 12 from second-tier regional banks 12 (7.3%). (The ratio to the total numberof responses shown in parenthesis.)44. Analysis Results and Discussion
4.1 Overview of Respondents
With regards to institutional framework, 70.9% of the financial institutions had comprehensive
partnerships or similar frameworks with local municipalities in place. As for whether they thought
Hometown Tax Donation enhanced comprehensive partnership, 4.9% responded that it did and 10.6%
responded that it most likely would going forward. 65.5% responded that they had a liaison officer
dedicated to regional development. As for whether they thought Hometown Tax Donation accelerated
or reinforced the setting up of teams or liaison officers dedicated to regional development, 1.7%
responded “Yes” and 5.9% responded “Slightly.” These results show that not a lot of financial
institutions think that Hometown Tax Donation enhances intra-regional partnerships between financial
institutions and municipalities. It was also revealed that Hometown Tax Donation has hardly had any
impact on institutional frameworks. Meanwhile, over 40% responded in the affirmative to the questionof whether they thought the scheme contributed to establishing or fortifying municipalities’ regional
comprehensive strategies. This implies that regional financial institutions seem to recognize to acertain extent that Hometown Tax Donation serves as a supportive tool for better fulfilling their roles,
taking into account that the expected role of regional financial institutions is “to support creating
regional comprehensive strategies” in the short run, and “to promote comprehensive strategies” and“to comprehensively support local businesses” in the long run (Kimura, 2005).
4.2 Perception of the Impact that Hometown Tax Donation has on Local Businesses and Economies
Prior studies have revealed that Hometown Tax Donation impacts local communities, including
higher interest toward local communities (Nishimura and Seta, 2017), expansion of networks (Kato,
2010), and enhanced business capabilities of local gift providers, e.g., development of packaging,product designs and new products, and shifts in distribution channels (Hoda, 2017). Meanwhile, in astudy by Yamori et al. (2017), 85% of the financial institutions responded that the area they want tostrengthen in terms of partnerships with municipalities is “enhancing management capabilities ofsmall- and medium-sized companies." If Hometown Tax Donation actually bolsters management
capabilities of small- and medium-sized companies, then one can argue that it is indeed contributing
to intra-regional industry-government-banking collaborations. Accordingly, in this research, we
asked respondents to select an answer from four choices for questions regarding the impact ofHometown Tax Donation on their local community: “1. Agree,” “2. Slightly agree,” “3. Slightly
disagree” and “4. Disagree.” Furthermore, “1. Agree” and “2. Slightly agree” were categorized as“effective,” while “3. Slightly Disagree” and “4. Disagree” were categorized as “ineffective.”
Results showed that regional financial institutions acknowledge that Hometown Tax Donation has acertain degree of impact on the local community, with 45.7% responding that is “effective” in5

“promoting intra-regional industry-government-banking collaborations.” Conversely, only 14.7%
responded that it is “effective” in “raising loan-to-deposit ratio” and 3.7% that it is “effective” in“contributing to starting up new businesses.” This suggests that while regional financial institutions
expect industry-government-banking collaborations to be promoted, they do not yet foresee visible
effects such as an increase in loan-to-deposit ratio or startups.
We also asked respondents to rate the extent to which they thought gift providers’ skills orcapabilities were enhanced on a scale of one to five. Results are shown in Table 1. Similarly, Table 2
shows the extent to which respondents thought Hometown Tax Donation contributed to regional
development.
Table 1: Impact of Hometown Tax Donation on Enhancing Gift Providers’ Business Capabilities(from the perspective of regional financial institutions)

Note: The number of responses varies between questions since some were unanswered; however, all questions
received 145 or more responses. Respondents were asked to rate each category on a scale of 1 to 5 in 1-point increments.
The average is shown in parentheses. Categories marked with “**” and “*” are those with significant differences of
1% and 5% levels from the median of 3 points in the t-test.

While it would be necessary to conduct a separate survey targeting local businesses andmunicipalities to validate the actual effects, Table 1 indicates that regional financial institutions
perceived a rise/improvement in gift providers’ motivation for developing new products, productdesign capabilities, local reputation and customer satisfaction. Table 2 shows that the scheme affected
local communities through “city marketing” driven by extra-regional sales expansion. One might
imagine then, that the scheme would also have a positive effect on migration/resettlement; however,6respondents were sceptical on this front. In short, regional financial institutions perceive Hometown
Tax Donation as having a certain degree of impact on local businesses and economies, yet not leading
to migration/resettlement, or an increase in supply of risk assets—their core business domain. With
regards to an increase in risk assets, the response rate for “effective” was low similar to that for the
aforementioned loan-to-deposit ratio.
Table 2: Impact of Hometown Tax Donation on Regional Development(from the perspective of regional financial institutions)

Note: The number of responses varies between questions since some were unanswered; however, all questions
received 145 or more responses. Respondents were asked to rate each category on a scale of 1 to 5 in 1-point increments.
The average is shown in parentheses. Categories marked with “**” and “*” are those with significant differences of
1% and 5% levels from the median of 3 points in the t-test.

4.3 Stance and Current State of Lending to Gift Providers
As for the lending stance of regional financial institutions to gift providers, approximately one outof five (20.8%) responded that they “intend to actively extend loans.” Meanwhile, less than 2%
responded that they “are cautious about lending in apprehension of backlash accompanying thepossible termination of Hometown Tax Donation.” Approximately half (47.2%) responded that they
“will consider the possibility of lending working capital while keeping a close watch on regulationtightening by the government.” Many of the financial institutions that responded "Other" commented
that their lending stance hasn’t changed.
We also asked about their screening stance. There are views fearing that loans will become nonperforming if the Hometown Tax Donation scheme is terminated from some reason. We assumed such7

sentiment might influence screening and lending stances. However, in our survey, only 5.2%
responded that they would “tighten screening standards for new or additional lending” to gift providers.
Meanwhile, 23.4% responded that they would “tighten screening standards only for capital investment
lending” and 46.1%—approximately half—responded that they would “maintain their current
screening standards.” Additionally, many who responded “Other” mentioned that they would maintaintheir current screening stance. This means that regional financial institutions are not necessarily
tightening screening standards against gift providers, but approximately one out of four respondents
are cautious about capital investment.
Next, we examined the actual lending landscape. 5.0% of the respondents had acquired newcustomers and extended new loans to them, and 7.2% had provided additional loans to existing clients
prompted by Hometown Tax Donation.11 In other words, the scheme has not triggered a large increasein lending. Meanwhile, 39.6% of the respondents had been asked by gift providers for counsel on cash
flow, while 32.1% had been asked for counsel on matters other than cash flow (e.g., productdevelopment, production framework and marketing methods).
In short, while 40% were asked by gift providers for counsel on lending, less than 10% of suchcases led to actual lending. This is consistent with results of the previous section suggesting that
regional financial institutions were skeptical about Hometown Tax Donation prompting an increase insupply of risk assets. Nonetheless, the fact that inquiries about lending are increasing should pose great
business opportunities for regional financial institutions which are facing challenges in increasing
lending volume and loan-to-deposit ratio. How then can we interpret the fact that such inquiries havenot led to actual extension of loans? One assumption is that this is due to the time lag between whenfinancial institutions provide counsel and when loans are actually extended. However, this does notseem to be the case, since as mentioned, only a small portion of regional financial institutions foresee
an increase in lending. In addition, they are not necessarily tightening their lending or screening
stances. One can interpret from the survey results thus far, that regional financial institutions are taking
a wait-and-see stance on lending to gift providers.
It is worth noting that over 30% of the respondents were asked for counsel on matters other thancash flow. In 2016, the Japanese Bankers Association (JBA) proposed three expected roles of financial
institutions in the area of regional development, based on a comprehensive view of the government’s
recent initiatives on this topic: firstly, to nurture talents who can identify business opportunities;
secondly, to actively excavate companies’ needs; and thirdly, to exert a consulting role tailored to each
local community. The fact that gift providers are seeking counsel from regional financial institutions
on matters other than lending, poses an excellent opportunity to fulfil the three roles proposed by the11

We verified whether financial institutions that responded that they “would actively lend” in the query above were
the ones actually providing new or additional loans, but the correlation was low. Of those that responded that they“would actively lend,” only 6.1% extended new loans, while 12.5% extended additional loans.

8JBA. To what extent are regional financial institutions leveraging this opportunity? When considering
Hometown Tax Donation as a solution to regional development, it is of great significance that thescheme is prompting regional financial institutions to actively provide advice and support to local
businesses on expanding sales channels, improving businesses, developing products and enhancing
productivity. Nevertheless, such advice and support do not seem to be bearing fruit considering thelending landscape and awareness of regional financial institutions revealed above.
Table 3 shows the analysis results classified by financial institution type.
Table 3: Lending by Regional Financial Institutions and Inquiries from Local Businesses
Triggered by Hometown Tax Donation

Note: “Urban” includes financial institutions in Tokyo, Kanagawa, Saitama, Chiba, Osaka and Ehime, while “Rural”
includes those in all other prefectures. “Regional banks” include both first- and second-tier regional banks.

Table 3 shows that financial institutions that have comprehensive partnerships with municipalities
tended to receive more inquiries on both lending and other matters. Meanwhile, financial institutionsin urban areas received less inquiries, suggesting that rural areas are indeed more affected byHometown Tax Donation. Looking at the breakdown by institution type, regional banks received more
inquiries. This is most likely because Hometown Tax Donation is a nationwide scheme, and thus, local
businesses have higher expectations toward regional banks which serve wider markets than credit
unions or shinkin banks, and have access to nationwide regional bank networks and best practices.
Furthermore, since credit unions and shinkin banks can only serve small- and medium-sizedcompanies that are qualified union members, relatively larger businesses have no choice but to consult
regional banks. To validate this assumption, it is necessary to conduct an analysis classifying giftproviders by business size.
Importantly, all financial institutions that acquired new clients and extended new loans promptedby Hometown Tax Donation have comprehensive partnerships with municipalities. Similarly, foradditional loans, all but one financial institution had comprehensive partnerships in place. This9

suggests that since the main players of Hometown Tax Donation are municipalities, financial
institutions tend to actively support local businesses if there is a foundation for industry-governmentbanking collaboration in their community, rather than based on a conventional industry-banking
relationship.12 Admittedly, it is too early to generalize these results since while 70% of the respondents
have comprehensive partnerships with municipalities, the number of samples for new/additional loans
is small. Nonetheless, it is important for local communities that don’t have such comprehensive
partnerships in place, to set up partnerships and subsequently or simultaneously participate inHometown Tax Donation. It should also be noted that all such loans were extended by financial
institutions in rural areas, namely by shinkin and regional banks, and none by credit unions.
A report released in 2014 by Shinkin Chuo Kinko states that “it is possible to utilize Hometown Tax
Donation as a trigger for municipalities and shinkin banks to collaborate in revitalizing the region,
including expanding sales channels or promoting local goods, or promoting the local community
through intra-regional collaboration.” However, this research revealed that regional financial
institutions are not yet leveraging such opportunities. In this respect, municipalities must actively
encourage regional financial institutions to get involved.
4.4

Financial Institution’s Perception of Hometown Tax Donation
Hometown Tax Donation frequently becomes a subject of controversy; hence, we also asked

regional financial institutions their perception on such controversial topics. Firstly, regarding the “giftto-donation ratio” proposed by the government, which is 30% or less, 38.5% responded that this wasadequate, 6.8% that it should be slightly higher, 18.7% that it should be slightly lower, and 36.0% thatthey were not sure, implying that most are satisfied with the current level. Secondly, when asked
whether they thought municipalities should decide the gift-to-donation ratio, 60.9% responded that“the government should set a certain range, and municipalities should have the discretion to determine
the actual ratio within that range.” Thirdly, when asked about their view on the Ministry of Internal
Affairs and Communications regulating the provision of expensive gifts including electronics andjewelry, 57.4% responded that such gifts “should partially be allowed depending on regional
characteristics or degree of merits to local businesses.” This implies that regional financial institutions
have a more accommodative view toward varying regional characteristics and circumstances in giftprovisions. Lastly, regarding gift provision itself, only 3.8% responded that it “should be banned,”
while 71.3% responded that it “does not pose a problem.” This implies that regional financial
institutions believe that provision of gifts contributes to the local economy. We also analysed the
responses by classifying financial institutions into urban/rural areas, since there is stronger criticism

12

In a query about excavating gift providers of Hometown Tax Donation, close to 15% responded that they were
engaged in such activities. Looking at the breakdown, financial institutions that have comprehensive partnerships
with municipalities tend to be more actively engaged.

10

toward the scheme in urban areas; however, no significant difference was identified.
5. Conclusion
In this paper, we examined the impact of Hometown Tax Donation on intra-regional industrygovernment-banking collaboration based on a survey to regional financial institutions. A decade has
passed since the scheme was launched, and its impact on local communities has been rising steadily
owing to the expansion of its market size. Admittedly, not all local communities or municipalities
benefit equally from the scheme since it involves transfer of tax from urban to rural areas and isdesigned to encourage competition among municipalities. Moreover, Japan needs to seek a proprietary,
optimal framework since the scheme is unprecedent even from a global standpoint. This research
examined whether Hometown Tax Donation serves or could potentially serve as a catalyst for
reinforcing regional financial institutions’ functions—a vital challenge acknowledged by the Japanese
government. Three policy implications were acknowledged:Firstly, Hometown Tax Donation is not necessarily triggering an increase in lending by regional
financial institutions. Regional financial institutions’ lending and screening stances are mostly neutral
toward deals related to the scheme, and not much different from other deals. Instead, results showedthat regional financial institutions are taking a wait-and-see stance toward the scheme itself.
Meanwhile, close to 40% of the respondents received inquiries about lending from local businesses
providing gifts in return for Hometown Tax Donations, and a little over 30% about business mattersother than lending. This presents a great business opportunity for regional financial institutions whoare expected to enhance their consulting capabilities, and it seems that Hometown Tax Donation isserving as a common ground for local businesses and financial institutions. However, there is no
momentum among financial institutions to actively leverage such opportunities, and intra-regional
industry-government-banking collaboration has not accelerated either. This is a crucial challenge
going forward.
Secondly, despite the overall landscape mentioned above, regional financial institutions that havecomprehensive partnerships with municipalities are offering new/additional lending triggered byHometown Tax Donation, and also have a higher ratio for receiving inquiries about lending and othermatters. This is consistent with Bank of Japan’s statement (2015) that industry-government-banking
collaboration bolsters the viability of regional development.
Thirdly, while regional financial institutions acknowledge that Hometown Tax Donation enhances
local businesses, including raising motivation for new product development, boosting design
capabilities, increasing employee satisfaction, and contributing to branding/marketing of the local
community, they do not see the scheme leading to migration/resettlement, or an increase in risk asset
supplies within the region.
While 45.5% of the respondents believe that Hometown Tax Donation could promote intra-regional
11

industry-government-banking collaboration, survey results revealed that such effects have not yetmaterialized. This implies that regional financial institutions are taking a wait-and-see stance toward
the policy itself, partially because the scheme has not earned their trust. Thus, it is necessary to gain
the confidence of financial institutions on the scheme’s continuance. On another front, Hometown Tax
Donation has triggered inquiries from local businesses to regional financial institutions on lending andother business matters. This may lead to the creation of a new business model for regional financial
institutions, such as has been proposed by the government and JBA.
Going forward, individual cases need to be examined to find out how regional financial institutions
are engaged in Hometown Tax Donation. This would allow us to determine whether industrygovernment-banking collaboration is largely dependent on respective, regional characteristics or
specific contents of comprehensive partnerships between municipalities and financial institutions, orif such collaboration can be applied across the board to other regions. If the impact of Hometown Tax
Donation on intra-regional industry-government-banking collaboration shows no significant progresshereafter from current levels, this may imply that the scheme lacks evidence validating its significance.
Municipalities and financial institutions should ideally engage in active discussions.

Acknowledgements
This study received research grants from The 21-Seiki Bunka Gakujyutsu Zaidan and Trust Bank,Inc.

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