Prime Minister Shinzo Abe has succeeded in wrestling down the yen and snapping a 15-year deflationary spiral. The challenge of spurring lending by the country's cash-hoarding megabanks remains.
The nation's three largest lenders increased their cash and deposits with other financial institutions 5.7 percent in the quarter to June to ¥82 trillion from the previous three-month period, earnings data show. New loans by Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. fell ¥329 billion to ¥239.1 trillion.
Abe needs to spur lending after the world's third-largest economy shrank at an annualized 6.8 percent in the second quarter due to an April sales-tax increase aimed at curbing the world's biggest debt burden. While the banks can no longer park excess cash in sovereign debt amid expectations for higher yields, falling loan rates have narrowed the spread over deposit payments to levels that discourage extending credit, according to Moody's Investors Service.