Japanese firms' loan-demand index turned positive in October, with 43 of 50 surveyed banks saying demand was about the same as in the prior three months, the Bank of Japan (BOJ) said.
The index rose to +3 points from -1 in the previous survey. Five banks reported moderately stronger demand and two reported moderately weaker demand. The BOJ gathered responses from Sept. 9 to Oct. 13; the survey was dated Oct. 22.
The 50 participating banks account for about 80% of outstanding loans at domestically licensed banks and shinkin banks. The index tracks lenders’ assessments rather than yen loan amounts. The BOJ nets reports of weaker demand against reports of stronger demand, assigning moderate responses half the weight of substantial ones.
Readings improved across company sizes: the index for large firms climbed to +7 points from +3, medium-sized firms rose to +3 from -4, and small firms increased to +1 from -2. In banks’ ratings of reasons for increased borrowing, customers’ higher fixed investment ranked highest for large and medium-sized firms. For small firms, the leading factor was a decline in customers’ internally generated funds.
Household demand strengthened to +5 points from +3, while local-government demand weakened to -4 from +3. Credit standards were unchanged for most borrowers: 92% of banks reported no change for large firms, 96% for medium-sized and small firms, and 98% for households.
Some banks widened the spread between loan rates and their funding costs. Six did so for highly rated firms and five each for medium- and low-rated firms; none reported a narrower spread. The survey tracks whether spreads changed but does not estimate the rate paid by individual borrowers. EconoTimes previously covered the BOJ’s corporate loan-demand reading.
For the next three months, 44 banks, or 88%, expected corporate demand to stay about the same. The survey period included the BOJ’s Sept. 18 decision to set its guideline for the uncollateralized overnight call rate at around 1.25%, effective Sept. 24; the survey does not isolate the decision’s effect on lending. The BOJ’s next policy meeting is scheduled for Oct. 29-30.
