The average daily lending balance by the nation's banks in 2001 fell 3.9 percent from the year before to 447.05 trillion yen for the fifth straight year of decline, the Bank of Japan said Friday.

Lending has been shrinking since 1997, when the failure of Yamaichi Securities Co. and Hokkaido Takushoku Bank put a spotlight on the true condition of Japan's financial system.

Compared with 1996, the average lending balance in 2001 was down by about 83 trillion yen, or 15.6 percent, the central bank said.

Fund demand is expected to remain weak as some businesses remain wary of the troubled economy and continue to shun new investments while others are in such poor financial health that banks are refusing to grant them new loans.

Bank lending dropped 4.3 percent in December from a year earlier, down for the 48th month in a row, the BOJ said.

The average daily lending balance for the month came to 440.63 trillion yen, it said in a preliminary report.

When adjusted for loan securitization, exchange-rate swings, the allocation of loan-loss reserves and other factors, the balance fell 2.1 percent to 450.92 trillion yen, down for the 39th straight month.

The figures cover five types of banks -- nationwide city banks, trust banks, long-term credit banks, regional banks and second-tier regional banks.

Wholesale prices fall

Domestic wholesale prices fell 1.4 percent in December from a year earlier for the 15th straight monthly dip, the Bank of Japan said Friday.

The fall brought domestic wholesale prices in 2001 down 0.8 percent from the preceding year following flat growth in 2000, the BOJ said.

The prices on the whole have been declining since 1992 except in 1997, when they rose 0.6 percent on the year after a hike in the consumption tax.

The domestic wholesale price index stood at 94.6 for December against the base of 100 for 1995. The index was unchanged from the preceding month. The index for all of 2001 stood at 95.3.

Confidence rate slips

The consumer confidence index in the Tokyo metropolitan area fell to 38.2 in December, down 6.1 points from a year earlier, according to a survey report released Friday by the Cabinet Office.

The survey covers five field: prices, living standards, income growth, employment and willingness to buy durable goods.

The gauge for prices was the only one to rise, growing 5.7 points to 52.2.

The index for living standards dropped by 6.5 points to 37.6, while that for income growth fell by 5.7 points to 36.7.

The index for employment plunged 17.6 points to 21.9, whereas that for willingness to buy durable goods fell 6.3 points to 42.8.

The survey, conducted Dec. 15 with a 100 percent response rate, covered 435 households comprising at least two people in the Tokyo metropolitan area.

Money supply up

The most closely watched indicator of Japan's money supply rose 3.4 percent in December from a year earlier, bringing its average growth for 2001 to 2.8 percent, up from 2.1 percent in 2000, the Bank of Japan said Friday in a preliminary report.

The 2001 increase in the average daily balance of M2 -- cash in circulation, demand deposits and quasimoney -- plus certificates of deposit, was the biggest since the 3.6 percent growth posted in 1999.

The average daily balance of M2 plus CDs came to 662.2 trillion yen in December, up from a revised 648.2 trillion yen in November, the central bank said.

The balance of M2 plus CDs, held principally by corporations, individuals and local governments, is the key money supply gauge and is considered to have the closest correlation to changes in economic activity.

The December fall brought the supply of quasimoney for 2001 down 2.6 percent, the biggest contraction since 1968, the latest year for which comparable data are available.

Quasimoney refers to time deposits and other types of savings that cannot be immediately cashed, including foreign-currency deposits and nonresidents' yen deposits.

The average balance of outstanding postal savings fell 5.8 percent to 240 trillion yen, after a 6.1 percent dip in November. The margin of decline narrowed again after falling in November for the first time since September 1998, indicating that the shift in maturing postal savings to other financial instruments has peaked.

Through 2001, the balance of postal savings contracted 4.7 percent, against a 1.3 percent growth in 2000.