Trade Finance Japan | 2024 Trade Finance Guide

2024 Guide | Trade Finance Global

Trade Finance - Japan

Welcome to the Japan Trade Finance and International Trade hub. Find out how our Japan-based team can help you access trade finance to increase your imports and exports, or find the latest research, information, and insights on trade finance here.

What is trade finance?

Trade Finance is the financing of goods or services in a trade or transaction, from a supplier through to the end buyer. It accounts for 3% of global trade, worth some $3tn annually. ‘Trade Finance’ is an umbrella term, which includes a variety of financial instruments that can be used by an importer or exporter.

These include:

  • Purchase Order Finance
  • Stock Finance
  • Structured Commodity Finance
  • Invoice Finance (Discounting & Factoring)
  • Supply Chain Finance
  • Letters of Credit (LCs) and;
  • Bonds & Guarantees

The terms Import Finance and Export Finance are used interchangeably with Trade Finance.

In order to address some of the common issues and misunderstandings around Trade Finance, we have put together this short guide.

How can trade finance benefit my Japan-based business?

Trade finance facilitates the growth of a business by securing funds required to purchase goods and stock. Managing cash and working capital is critical to the success of any business. Trade finance is a tool which is used to unlock capital from a company’s existing stock or receivables or add further finance facilities based on a company’s trade cycles.

Why does this help? A trade finance facility may allow you to offer more competitive terms to both suppliers and customers, by reducing payment gaps in your trade cycle. It is beneficial for supply chain relationships and growth.

Other benefits of trade finance

  • Short to medium-term working capital, using the underlying products or services being imported/exported as security/collateral. It increases the revenue potential of a company, and earlier payments may allow for higher margins.
  • Trade finance allows companies to request higher volumes of stock or place larger orders with suppliers, leading to economies of scale and bulk discounts. 
  • Trade finance can also help strengthen the relationship between buyers and sellers, increasing profit margins. It allows a company to be more competitive.
  • Managing the supply chain is critical for any business. Trade and supply chain finance helps ease out cash constraints or liquidity gaps – for suppliers, customers, third parties, employees or providers. Earlier payments also mitigate risk for suppliers.

It is important to note that trade finance focuses more on the trade than the underlying borrower, i.e. it is not balance sheet led. Therefore, small businesses with weaker balance sheets can use trade finance to trade significantly larger volumes of goods or services and work with stronger end customers.

Due to the embedded risk mitigants that surround trade finance lending and instruments, it leads to the potential of a diversity of supplier base for trading companies. A more diverse supplier network increases competition and efficiency in markets and supply chains.

Companies can also mitigate business risks by using appropriate trade finance structures. Late payments from debtors, bad debts, excess stock and demanding creditors can have detrimental effects on a business. External financing or revolving credit facilities can ease this pressure by effectively financing trade flows.

 

Get started – talk to our Japan team



If you have a trade finance enquiry, please use the contact form below.

 

Finance Queries:

jp.team@tradefinanceglobal.com

trade.team@tradefinanceglobal.com

Partnership Queries:

introducers@tradefinanceglobal.com

Find out more about partnering with us here.

 

Want to learn more about Trade Finance?

Look no further. We’ve put together our feature Japan trade finance insights, research and articles, and you can catch the latest thought leadership from the TFG, listen to podcasts and digest the latest in international trade in the region right here.

From the Editor – Trade Finance Insights

Trade finance and ISO 20022 A matter of when, not if Trade finance and ISO 20022: A matter of when, not if? Discover how ISO 20022 can reshape the world of trade finance and what banks need to do to prepare for a global adoption.
Navigating the energy landscape of 2024 The hydrogen horizon unveiled The rise of hydrogen and its impact on the energy market Discover the transformative role of hydrogen in the global energy sector in 2024. Explore the trends shaping the energy landscape and the potential of renewables.
Digital trade finance gets a lifeline: Xalts to acquire Contour Network Digital trade finance gets a lifeline: Xalts to acquire Contour Network Singapore-based fintech start-up Xalts, has announced the acquisition of Contour Network after Contour announced bankruptcy in October.
UK to join Indo-Pacific trading bloc UK to join Indo-Pacific trading bloc Business and Trade Secretary Kemi Badenoch officially signed the accession treaty to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in New Zealand, marking the beginning of the UK’s… read more →
Future of Trade: New opportunities in high growth corridors Future of Trade: New opportunities in high growth corridors Globalisation is not dead, contrary to recent claims. Nowhere is this more evident than in global trade, where high-growth trade corridors in Asia, Africa and the Middle East are set to outpace the global average by up to four percentage points.
Japan reinstates South Korea as preferred trade nation Japan reinstates South Korea as preferred trade nation Today, Japan declared its decision to reinstate South Korea as a preferred nation with fast-track trade status, effectively ending a prolonged four-year economic row that had exacerbated their bitter historical… read more →
LNG Venture Global LNG and JERA sign 20-year LNG agreement Today, Venture Global LNG announced the execution of a long-term Sales and Purchase Agreement (SPA) with JERA Co., Inc. for the sale of 1 million tonnes per annum (MTPA) of… read more →
South Korea adds Japan to trade “white list”, mending trade relations South Korea adds Japan to trade “white list”, mending trade relations South Korea has formally restored Japan to its list of countries it gives preferential treatment in trade, three years after the neighbours downgraded each other’s trade status amid a diplomatic… read more →
Largest trade deal since Brexit: UK joins free trade bloc in Indo-Pacific Largest trade deal since Brexit: UK joins free trade bloc in Indo-Pacific The UK is set to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an expansive free trade area of 11 countries spanning the Indo-Pacific. The new agreement follows… read more →

Videos – Trade Finance

Trade Finance Frequently Asked Questions

What types of Trade & Receivables Finance does TFG offer?

TFG assists companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.

We assist specialist companies to scale their trade volumes, by matching them with appropriate financing structures – based on geographies, products, sector and trade cycles. Contact us to find out more.

Trade Finance & Stock Finance

  • Trade Finance (Purchase Order Finance)
  • Stock Finance
  • Pre Export Finance
  • Import & Export Finance
  • Structured Commodity Finance
  • Letters of Credit
  • Bonds & Guarantees

Receivables Finance & Invoice Finance

  • Receivables Purchase
  • Invoice Finance
  • Discounting
  • Factoring
  • Supply Chain Finance

Specialist Trade & Receivables Finance

  • Borrowing Base Facilities
  • Back-To-Back LC Lines
  • Long Dated Receivables – Media, Sport
  • Revolving Credit Facilities (RCF)
What is the process for applying for trade finance?

1. Application

The initial ‘credit’ application drives the process when applying for credit.

Lenders will often ask for information on current assets or collateral that the business owns, including debt and overdrafts, assets that the company or directors own (property, equipment, invoices).

2. Evaluating the Application

The evaluation process will normally involve some kind of credit scoring process, taking into account any vulnerabilities such as the market the business is entering, probability of default and even the integrity and quality of management.

3. Negotiation

Eligible SMEs applying for trade finance can negotiate terms with lenders. An SME’s aim with a lender is to secure finance on the most favourable terms and price. Some of the terms that can be negotiated can include fees and fixed charges, as well as interest rates.

4. The Approval Process and Documentation of a Loan

Typically, the account officer who initially deals with the applicant and collects all of the documentation will do an initial credit and risk analysis. This then goes to a specific committee or the next level of credit authority for approval. If the loan is agreed (on a preliminary basis) it goes to the legal team to ensure that collateral can be secured/ protected and to mitigate any risks in the case of default.

Read our full ‘trade finance application process’ here.

Strategic Partners:

Get in touch with our Japan trade team

Speak to our trade finance team

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About the Author

Sheena is responsible for the TFG Weekly Trade Briefings at Trade Finance Global (TFG).

She loves the digitalisation of trade and is fascinated about its impact on day to day transactions.

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