Japan bank lending hits four-year high as BOJ pumps money

TOKYO Mon Jul 8, 2013 1:56am BST

A man walks past the Bank of Japan headquarters in Tokyo July 5, 2013. REUTERS/Toru Hanai

A man walks past the Bank of Japan headquarters in Tokyo July 5, 2013.

Credit: Reuters/Toru Hanai

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TOKYO (Reuters) - Japanese bank lending marked its biggest annual increase in four years in June, suggesting the central bank's aggressive monetary stimulus and brightening economic prospects are spurring fund demand for fresh investment.

Outstanding loans held by Japanese banks rose 1.9 percent in June from a year earlier, Bank of Japan data showed on Monday, marking the 20th straight month of increase and posting the biggest gain since July 2009.

"The recent increase in demand for funds is related to mortgage lending and the housing market," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"I expect bank lending to continue to steadily increase, which is part of the portfolio rebalancing that the BOJ is trying to encourage."

Borrowing for investment in real-estate trust funds, and overseas mergers and acquisitions, also contributed to the increase, which followed a 1.8 percent rise in May, a BOJ official told a briefing.

The data bodes well for the BOJ, which hopes its aggressive stimulus plan will encourage banks to funnel money to lending and risky assets, instead of loading up on low-risk, low-return government bonds. It forms part of the central bank's strategy to spur growth and inflation.

The BOJ stunned markets on April 4 by setting in motion an intense burst of monetary stimulus, pledging to double its holdings of government bonds and boost purchases of risky assets to achieve its 2 percent inflation target in two years.

Data released last month confirmed Japan was already out of the shallow recession that took hold in late 2012, as the economy grew at an annualised 4.1 percent in the first quarter of this year.

The central bank is widely expected to stand pat on monetary policy this week and revise up its assessment of the economy to suggest that the world's third-largest economy is recovering thanks in part to the government's reflationary policies.

Separate government data showed on Monday that Japan's current account surplus rose 58.1 percent in May from a year earlier in a sign that recovering exports and hefty gains from overseas investments helped the nation's balance of payments.

(Additional reporting by Kaori Kaneko and Stanley White; Editing by Shri Navaratnam)

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