News Archive : Japan Real Estate

Monday, November 14, 2005

BOJ WATCH: Does Aggressive Lending Hint At Imminent Bubble?

BOJ WATCH: Does Aggressive Lending Hint At Imminent Bubble?
2005/11/10, Nikkei English News, , 263 words

TOKYO (Nikkei)--Commercial banks are increasingly boosting their lending, and some Bank of Japan officials worry that this is a sign that an economic bubble is about to occur.
According to data released Wednesday by the BOJ, commercial banks' monthly average lending balance inched up 0.9% for October when such special factors as loan securitization and disposals are excluded, marking the third consecutive month of increase. And the Japanese Bankers Association said Tuesday that banks' outstanding lending balance as of the end of October was up for the first time in more than six years.
But commercial banks' aggressive lending is giving some at the central bank the jitters. A senior official says he is "anxious about major banks' vigorous marketing campaigns in rural areas and regional banks' increased lending in urban areas" because these are "typical developments to be made when monetary easing starts to have effects."
Some market participants share this view. "Since corporations are using their cash on hand for capital outlays, borrowing urged by banks tends to end up being invested in real estate and risky financial assets," says Takehiro Sato, an economist at Morgan Stanley Japan Ltd.
Such aggressiveness in lending is making BOJ officials worry that it may indicate an imminent bubble, prompting them to call for an early interest rate hike after the quantitative easing policy is terminated in the spring.
But others dismiss such concerns. The central bank should have a monetary policy that focuses on "ensuring that the economy will not come under deflationary pressure again," an official says.
(The Nikkei Financial Daily Thursday edition)