TOKYO (Reuters) – Japanese bank lending grew at the fastest annual pace on record in May, as cash-strapped businesses used loans to meet immediate financing needs to survive slump in sales due the coronavirus pandemic, central bank data showed on Monday.
The data suggests that a series of measures taken by the government and the central bank to funnel money to struggling businesses, including demands on financial institutions to increase lending, are working at least for now.
Total bank loans and “shinkin” credit unions increased 4.8% in May from the previous year to 562.5 trillion yen ($ 5.13 trillion), s’ accelerating from a 2.9% gain in April and marking the fastest pace of increase since comparable data became available in 2001, data from the Bank of Japan showed.
“Data shows increased demand for corporate funds in response to the coronavirus pandemic,” a BOJ official told reporters, adding that rising costs of credit have so far not deterred financial institutions to lend.
Big bank loans jumped a record 6.6% in May, data showed, with large companies borrowing more as a precaution in case the fallout from the virus persisted, the official said.
Regional banks also saw their lending increase 3.8%, reflecting growing demand from small businesses, the data showed.
The Japanese economy is in recession and analysts expect it to contract 22% on an annualized basis in the current quarter, as lockdown measures – put in place in April and lifted at the end of May – have forced businesses to close their doors and citizens to stay at home.
The BOJ launched a loan program in March to encourage financial institutions to lend to small businesses, which has so far injected 14 trillion yen into the economy.
Reporting by Leika Kihara; Editing by Kim Coghill