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The average daily balance of bank lending grew for the eighth straight month in March, up 1.5 percent from the previous March after adjustment for special factors, according to a Bank of Japan report released Wednesday.

The loan balance, which stood at 391.22 trillion yen, suggests a steady rise in lending demand is following the economic upswing.

The balance, excluding loans by “shinkin” savings-and-loan banks, was adjusted for special factors — loan securitization, exchange-rate fluctuations and the allocation of loan-loss reserves.

March’s increase is the largest since the BOJ began releasing the data in October 1998. Bank lending rose a revised 1.5 percent in February.

Taking the March data into account, the average daily lending balance posted a 0.5 percent rise in fiscal 2005 compared with the previous year after adjustment for special factors, marking the first yearly increase.

Before adjustment for special factors, the loan balance rose 0.3 percent to 386.63 trillion yen, up for the second straight month.

The margin of increase is the highest since the lending balance registered a 0.7 percent rise in August 1996, a BOJ official said.

Including the March data, the balance of bank lending fell 1.3 percent in fiscal 2005. But the margin of decline is the smallest since fiscal 1997, when the balance marked a 0.3 percent drop.

“Demand for bank lending has been gradually growing as the economic recovery creates new loan demand,” the official said.

Companies have been reducing their debts, providing room for them to borrow funds from banks more actively, he added.

According to the BOJ report, the loan balance at banks, including shinkin banks, rose 0.4 percent to 448.95 trillion yen in March from a year earlier before adjustment for special factors.

The loan balance fell 1.2 percent at city banks and trust banks, as well as at Aozora Bank, which until the end of this March remained Japan’s only long-term credit bank.

The loan balance rose 2.2 percent at regional and second-tier regional banks.

The balance at shinkin climbed 0.7 percent in March from the year before.