TOKYO (MNI) – The level of outstanding loans extended by Japanese
banks fell 2.1% year-on-year in November to Y391.92 trillion, marking
the 12th straight y/y drop, with the pace of decline being flat from a
revised -2.1% (preliminary -2.0%) in October, Bank of Japan data
released on Wednesday showed.

The 2.1% on-year fall is the largest decline since June 2010, when
it was also down 2.1%, a BOJ official said.

Weak corporate fund demand continues to be the main cause of the
bank lending decline, the official told reporters.

Corporate demand for bank loans remains sluggish as many firms
remain cautious about resuming business investment in equipment amid
continued overcapacity and uncertainty over the global economic outlook.

Also, firms continue to have ample cash on hand due to strong
corporate profits.

“Signs of a pick-up in business fixed investment are expected to
gradually become more evident as the improvement in corporate profits
continues,” the BOJ’s latest economic report said.

“However, with firms’ persistent sense that they have excessive
capital stock, the pace of improvement in business fixed investment is
likely to remain moderate,” it added.

The year-on-year decline in lending has held to a narrow range of
-1.6% to -2.1% in the first 11 months of this year.

Economists don’t expect a rise in bank lending to be seen in the
near future.

In November, outstanding loans by city banks fell 4.6% from a year
earlier, the 13th consecutive month of y/y drops, with the pace of
decline accelerating from a revised -4.4% in October.

Combined lending by banks and shinkin credit unions fell 2.0% y/y
in November to Y454.38 trillion after dropping 2.0% in October.

November marked the 12th consecutive month of y/y drops.

The balance of commercial paper issuance was Y10.08 trillion at the
end of November, down 9.0% from a year earlier. The pace of decline was
faster than the -8.2% in October.

The balance of CP issuance posted the 27th consecutive y/y drop.

Lending by large regional banks was up 0.9% in November from a
year earlier, up for the sixth consecutive month, after rising 0.7% in
October.

Lending by second-tier regional banks fell 0.5% year on year in
November, following a 0.6% fall in the previous month.

Loans extended by credit unions were down 1.1% on year in November,
posting the 11th straight y/y drop, after falling a revised 1.3% in
October.

After adjusting for special items such as loan securitization,
foreign exchange rates and write-offs of bad debt, lending fell 1.8%
year on year in November, marking the 12th straight y/y drop after
falling 1.8% in October.

The 0.9% fall in December 2009 was the first on-year drop in 53
months.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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