Tokyo Star Bank Ltd. has introduced a unique service offering loans and accounts to non-residents looking to purchase real estate in Japan. Since the service launched last year (2023), it has seen rapid growth, fueled by Japan’s weak yen and attractive low interest rates, which have sparked international interest in the country’s property market.

The bank has gained “several hundred” new clients in just one year, with most being affluent individuals from Taiwan, mainland China, Hong Kong, and Singapore. Tokyo Star expects that by the end of this year, the loan balances for high-net-worth individuals through this program will have tripled compared to the first half.

Though Tokyo Star is a smaller player in Japan’s banking sector, with ¥2.3 trillion ($16 billion) in assets, its parent company, CTBC Financial Holding Co. (Taiwan’s third-largest financial group), provides significant support. This acquisition made CTBC the first foreign company to own a Japanese bank when it purchased Tokyo Star over a decade ago.

Unlike many other Japanese banks, Tokyo Star offers services to non-residents. According to Tanimura, the bank’s executive officer in charge of cross-border business, the main competition comes from branches of Taiwanese and Chinese banks operating in Japan. Tokyo Star leverages its parent company’s extensive Asian network to conduct client verifications, enabling them to offer services that traditional Japanese banks shy away from due to their stricter know-your-customer protocols.

The loans range from ¥20 million to several billion yen, and clients have used them to acquire a variety of properties, from individual apartment units to entire buildings and hotels. Notably, the bank financed a purchase in the exclusive Azabudai Hills, one of Tokyo’s most prestigious real estate developments, where one unit reportedly sold for over $100 million.

Tanimura emphasized that international investors are now taking advantage of leverage to expand their portfolios. “We’re receiving interest from across Asia, particularly from those who previously relied solely on cash for purchases because banks wouldn’t lend to them. Now they see an opportunity to scale their investments.”

Tokyo Star’s expanding real estate loan services offer insight into the growing trend of foreign investment in Japan’s property market. This market has limited public data, but rising demand from abroad has been a key factor in driving up prices. In Tokyo, the average price of newly built condominiums has hit record highs for three consecutive years, due to a combination of low interest rates, limited supply, and a shortage of construction workers. Foreign demand, particularly from Asian buyers, has played a significant role.

According to Christine Li, Knight Frank’s head of Asia-Pacific research, private investment from family offices in Asia has become more prominent as investors seek stability amid regional uncertainty. Asian buyers from Taiwan, Hong Kong, and Singapore dominate the Japanese property market, she noted.

Looking ahead, Tokyo Star aims to make cross-border banking a core part of its business strategy, with a focus on wealthy clients across Asia, particularly from China. Over the past year, the division has expanded, adding around 20 new employees, half of whom are Mandarin speakers, to better serve this growing clientele.

Although the bank did not disclose its loan rates for international customers, it stated that they are competitive with those offered to local residents, which hover around 2%. Typically, the bank finances around 50% of the property’s purchase price.

Despite the yen’s recent rebound and the possibility of interest rate hikes by the Bank of Japan, Tanimura remains optimistic about foreign interest in Japanese real estate. “While yen appreciation could affect investor appetite, we haven’t seen significant changes yet. Tokyo’s real estate remains relatively affordable compared to global markets,” he remarked.

This burgeoning business underscores how Tokyo Star is capitalizing on the increasing appetite for Japanese property among wealthy foreign buyers, especially as Japan remains a compelling destination for real estate investments.