Friday, November 19, 2010

October - bank lending falls 1.9%

Outstanding loans by Japanese banks dropped 1.9 percent from a year earlier in October, the Bank of Japan (BOJ) said in report on Tuesday.

According to the BOJ data, outstanding loans held by Japan's four main categories of banks, including 'shinkin' or credit unions, stood at a lesser 456.98 trillion yen (5.6 trillion U.S. dollars) in the recording period, in a sign the central bank's highly accommodating monetary policy is not encouraging corporations and consumers to spend and borrow.

Although concerns over a strong yen, which hit 15-year highs against the U.S. dollar recently, are beginning to wane, major economies' moves towards quantitative easing has unsettled some markets, although economists are yet to describe the situation as a 'currency war.'

Such currency issues continue to weigh on businesses and their economic outlook and hence demand for bank loans continues to slump.

"I think the figures will continue to fall slightly as the domestic economy seems to have peaked," said Seiji Shiraishi, an analyst from HSBC Securities Japan.

"After the financial crisis, bank lending and money supply rose for a while, but this was not real demand for funds. Big companies were borrowing large sums of money to ensure liquidity in a time of unease. There is no change in the weakness of actual demand for funds."

"The Bank of Japan can only provide funds to the banks. Whether the banks can actually lend that money depends on demand. There are really no effective measures left for the BOJ. But they can not accept deflation, so while deflation continues they must continue to act in coordination with the government. I think that action will basically consist of buying one-to two-year JGBs," Shiraishi said.

Excluding factors such as loan write-offs, the loan balance fell 1.7 percent from the same month a year earlier.

http://news.xinhuanet.com/english2010/business/2010-11/09/c_13597803.htm

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