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Lending by Japanese banks fell 4.5 percent in May from a year earlier, down for the 53rd consecutive month, the Bank of Japan said Monday.

The average daily lending balance for the month came to 488.02 trillion yen, remaining below the 500 trillion yen line for two straight months, the central bank said in a preliminary report.

The drop was attributed to weak fund demand from businesses and the reluctance of banks to lend because of their focus on disposing of bad loans, analysts said.

When adjusted for special factors — including loan securitization, exchange-rate fluctuations and the allocation of loan-loss reserves — the May lending balance fell 2.6 percent to 434.79 trillion yen for the 44th straight month of decline, the BOJ said.

The figures cover banks with nationwide branch networks known as city banks, trust banks, regional banks, second-tier regional banks and “shinkin” (credit) banks.

On an unadjusted basis, the May balance at city banks and trust banks fell 6.8 percent to a combined 251.8 trillion yen, while that at regional banks inched down 0.6 percent to 130.49 trillion yen.

The lending balance dropped 3.6 percent to 43.2 trillion yen at second-tier regional banks and 3.5 percent to 62.52 trillion yen at shinkin banks.

The daily balance of real deposits and certificates of deposit at city banks, regional banks and second-tier regional banks rose 2.4 percent in May to 484.12 trillion yen, the BOJ said.

The outstanding balance of commercial paper at the end of May rose 5.9 percent to 21.91 trillion yen.

The balance of lending at foreign banks operating in Japan surged 25.8 percent to 9.85 trillion yen.

Money supply rises

Japan’s key money supply gauge rose 3.5 percent in May from a year earlier, the Bank of Japan said Monday.

The central bank added, however, that the balance of quasimoney — most of which is held in time deposits — logged a record decline in the wake of the government’s April abolition of full time-deposit protection.

The average daily balance of M2 — cash in circulation, demand deposits and quasimoney — plus certificates of deposit came to 670.3 trillion yen, compared with 671.2 trillion yen in April, the central bank said.

The balance of quasimoney dropped by 13.6 percent to 318.4 trillion yen, logging a new record for its margin of decline for the seventh consecutive month.

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

The record fall in the balance of time deposits, which dropped in step with a continued surge in the balance of demand deposits, underscored a funding shift that has been in progress since a few months before the government abolished its full refund guarantee on time deposits in the event of bank failures.

The balance of M2 plus CDs, held principally by corporations, individuals and local governments, is believed to correlate with changes in economic activity.

A breakdown of the money-supply data shows that cash in circulation rose 13.5 percent to 63.9 trillion yen in May, against a revised 12 percent gain in April.

Meanwhile, deposit funds — demand-deposits and checking accounts — grew 37.2 percent to 269.1 trillion yen, following a revised 38.6 percent surge in April.

The balance of M1 — cash in circulation plus deposit money — climbed 31.9 percent to 333 trillion yen, following a 32.6 percent surge in April. The May rise in M1 practically mirrors the record 32.7 percent leap registered in July 1973.

The balance of CDs fell 28 percent to 18.9 trillion yen, following a revised drop of 38.1 percent in April.

Broadly defined liquidity, the widest measure of the money supply, rose 1.2 percent to 1.318 quadrillion yen in May, following a revised increase of 1.5 percent in April.

The gauge includes postal savings, deposits at agricultural and fishery credit cooperatives, loan trusts and money trusts, bank debentures, Japanese and foreign government bonds, and the M2 balance plus CDs.

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