By Leika Kihara
TOKYO (Reuters) – Japan’s bank lending rose in July at the slowest annual rate in nearly nine years, data showed Tuesday, a sign that companies were steadily emerging from a cash crisis last year caused for the coronavirus pandemic.
But the slowdown in lending also reflected slow consumption, as households hoarded cash rather than spent, underscoring the fragile nature of Japan’s economic recovery.
Total bank loans rose 1.0% in July from a year earlier, Bank of Japan data showed a slowdown from a 1.4% gain in June and marked the lowest year-on-year increase since November 2012.
Bank lending increased last year when businesses needed immediate cash to ease the impact of the coronavirus pandemic on businesses.
“Some companies were repaying loans that they used as a precautionary measure,” a BOJ official said in a briefing. “Bank deposits remain at high levels, which shows that households are cautious when it comes to boosting spending,” he added.
The average balance of bank deposits rose 5.7% in July from a year earlier to 831 trillion yen ($ 7.53 trillion), far exceeding the 578 trillion yen of bank loans, the data showed.
Major banks saw lending drop 1.4% in July from a year earlier after a 1.6% drop in June, largely in reaction to last year’s surge in demand for funds to meet the impact of the pandemic.
Regional banks increased lending by 2.3% in July, a slowdown from a 2.9% increase in June, suggesting that cash restrictions were easing even for small and medium borrowers.
Japan’s economy emerged from last year’s hit of the pandemic thanks to robust foreign demand, although the outlook is clouded by a resurgence in COVID-19 infections that is paralyzing private consumption.
($ 1 = 110.3400 yen)
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