Japanese corporates’ loan demand shrunk in April-June: survey

Thirteen lenders noted that demand was moderately weaker than the preceding 3-month period.

Japanese companies’ demand for loans shrunk from April to June and is expected to remain muted in the following quarter, according to a central bank report that surveyed the 50 largest banks in the country.

Demand for loans from Japanese firms fell to negative 11 percentage points, according to a survey by the Bank of Japan, from positive 9 in the previous survey, reflecting a weakening of lending interest from companies.

Amongst bank respondents, 13 lenders said that demand for loans from firms is “moderately weaker” compared to the previous survey, whilst 35 responded that there were more or less no changes to demand.

Breaking down by size, small firms saw a dramatic turnaround in demand—from a positive 10 in the previous survey to a minus 11 in the recent survey. Fourteen banks indicated that demand from small firms was moderately weaker; one bank even said that demand was substantially weaker.

Demand from large firms also worsened to minus 11 from minus 2, whilst demand from mid-sized firms sank to minus 6.

The muted loan sentiments reflect renewed uncertainty in the near term amidst rising cases of COVID-19 infections. The upcoming Summer Olympics has only invited more uncertainty, with the recent infection spike in Tokyo pushing officials to prohibit spectators. Officials have confirmed three people who tested positive for COVID-19 inside the Olympic Village. 

Photo courtesy of Jezael Melgoza