Loan demand has improved in Japan following the recent rate cut and promise of further stimulus. Demand for credit from consumers and local government became slightly stronger during October, while demand from companies weakened but at a far less severe rate than last quarter, according to a survey of senior loan officers from the Bank of Japan.
The picture wasn’t entirely rosy, with local governments’ demand strengthening at a sixth of the rate last month (see chart). And we must be wary of seeing a new trend from this datapoint or even in attributing the change in this volatile and subjective indicator to the rate cut. This is clear from the respondents’ view of next quarter, also shown on the chart: i.e. a slight weakening of demand. (Their predictive power last quarter was excellent.) Banks continue to ease their credit standards, and point to increased competition and efforts to grow as reasons for the change.
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