Survey shows climate in Japan still bad for loans

16:45, October 21, 2009      

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Private industry, governments and households remain reluctant to take out loans in Japan, according to a survey released by the Bank of Japan (BOJ) on Wednesday.

Demand for loans remained at minus 14 for firms while that read one for local governments and stood at minus 15 for households.

The Senior Loan Officer Opinion Survey on Bank Lending Practices at Large Japanese Banks for October showed that a large majority of companies asked believe there has been little change since July in dour conditions for this sector.

Some 66 percent of companies said that lending for firms was at about the same level as July, while 74 percent believed this to be true for households and for local governments.

Very few thought conditions had improved, however, with only four percent being positive on firms, 14 percent on local governments and two percent for households. In contrast, 30 percent thought demand had weakened for firms, 12 percent for local governments and 24 percent for households.

Of the 50 banks surveyed for the report, 94 percent said they expected conditions and demand to remain the same over the next three months for firms, 90 percent said the same for local governments and 82 percent for households.

No banks, however, expected demand to improve for household loans, in line with recent reports from the bank of Japan.

In its Monthly Report of Recent Economic and Financial Developments, which was released Thursday, the bank said, "domestic private demand as a whole is likely to remain relatively weak with corporate profits and the employment and income situation remaining severe."

A series of reports released by the BOJ this month have shown that the economy seems to have bottomed out, although there are few signs of a fast recovery, with few areas of the economy growing at a significant rate.

Demand for loans is an indicator of investment within an economy and therefore the figures released Wednesday show that there may still be a long way to go before Japan is fully on the road to recovery.

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