Photo/IllutrationThe logo of Mitsubishi UFJ Financial Group Inc. (Provided by Mitsubishi UFJ Financial Group Inc.)

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Mitsubishi UFJ Financial Group Inc. (MUFG) is set to scale back loans for coal-fired plants by up to half by fiscal 2030, as momentum builds across the globe to curb carbon emissions, The Asahi Shimbun has learned.

Terminating the extension of fresh loans for coal-fired plants, in principle, MUFG, one of Japan's biggest financial firms, looks to lower its loan volume of about 1 trillion yen ($9 billion) at home and abroad by 30 to 50 percent, according to several sources.

The move is meant to clearly indicate the bank's environmentally friendly stance as a financial institution, especially related to coal power generation, which causes considerable carbon dioxide (CO2) emissions.

With regard to loans for coal-fired plants operated by power utilities and other entities, MUFG said last year it "will carefully consider whether to provide fresh loans" to them "after fully recognizing situations in each country and the global situation."

Setting a strict guideline of "not extending loans for newly set up coal-fired thermal power plants, in principle," the strictest policy on loans for such power compared with other banks, MUFG will drastically slash its loans for such use.

However, MUFG's outstanding loan balance for coal-fired plants will likely rise for several years, as the bank will continue to extend loans to those it already agreed to deal with, and owing to cases under negotiations with the government and other exceptional cases.

The new guideline is expected to be officially decided by the end of May and applied from July.

Still, in the eyes of the world, major Japanese banks appear to continue supporting coal-fired plants with exorbitant loans, as suggested in a report compiled by German and Dutch nongovernmental organizations late last year.

Japan’s three megabanks were among the top four in a list of institutions offering loans for coal-fired plants from 2016 to September 2018. Mizuho Financial Group Inc. (MFG) topped the list with $12.8 billion (about 1.4 trillion yen), while MUFG ranked second with $9.9 billion, according to the report. Sumitomo Mitsui Banking Corp. (SMBC) came fourth with $4.2 billion.

SMBC and MFG declined to reveal exact targets for trimming of the balance of outstanding lending for coal-fired plants in an inquiry from The Asahi Shimbun.

The megabanks’ about-face on their loan policy for coal-fired plants is expected to affect the government’s energy policy in the days ahead.

The New Strategic Energy Plan approved by the government in July set a goal of coal thermal power accounting for 26 percent of the nation’s overall energy as of fiscal 2030, the same level before the Great East Japan Earthquake and tsunami triggered the Fukushima nuclear disaster in 2011.

Yet, if a move like that of MUFG spreads to other banks, newly established coal-fired plants will find themselves in a business gridlock without receiving any loans.

In accordance with the 17 sustainable development goals (SDGs) adopted at the United Nations in 2015, which include “climate action,” Japanese firms beefing up their overseas businesses have been held strictly accountable for their efforts to achieve such goals.

The United Nations urged all member countries to realize the internationally shared goals by 2030.

With fresh moves by the Japanese megabanks that do a vast amount of lending, the rising international trend to end coal will likely further affect Japan.