Sumitomo Mitsui Banking Corporation (SMBC) and the Japan Bank for International Co-operation (JBIC) are launching a borrowing scheme for Russian businesses.

The initiative will see the pair provide loans to Russian SMEs and midcaps through Alfa Bank, a Russian lender. Guarantees will be provided by Nippon Export Investment Insurance (Nexi) – Japan’s export credit agency.

There has been no set figure for total lending, but officials expect it to run into the hundreds of millions. While this is not the first such scheme to be established between Japan and Russia, it is the first since US sanctions in 2014 deterred Japanese lenders’ activity in Russia.

Being a privately-owned bank, however, Alfa Bank is not subject to these sanctions and thus can be party to dollar-based transactions. It marks the latest in an accelerated programme through which Japan and Russian have sought to deepen their financial ties in recent months.

In October, JIBC agreed to lend US$38.5mn to Sberbank, which would be on-lent to the operator of Vostochny Port for the purchase of Japanese equipment. This was part of an eight-point economic plan established by respective national leaders Shinzo Abe and Vladimir Putin in May, through which economic co-operation between the two countries is to be re-established.

In November, this was followed up with the creation of a US$900mn investment fund, jointly-created by state-backed lenders from Japan and Russia. The parties involved were JBIC, the Far East investment and Export Agency, and Baikal Region Development Fund (both Russian institutions).

As part of the agreement, JBIC was to extend a further ¥30bn (about US$261mn) credit line to Sberbank.

With economic relations strengthening, Vladimir Putin was due in Japan this week, with regional analysts hopeful that the pair can finally come to an agreement over island disputes which have prevented the countries from ever signing a post-World War II peace treaty.

The disputed islands – known as the Northern Territories in Japan and the Southern Kurils in Russia – will be on the agenda, with both leaders hoping that a diplomatic success will send a strong signal to their respective home electorates.