TOKYO (Reuters) - Japanese bank lending rose at the fastest annual pace on record in May as cash-strapped companies tapped loans to meet immediate funding needs to survive slumping sales from the coronavirus pandemic, central bank data showed on Monday.
The data suggests a raft of measures the government and the central bank took to channel money to ailing firms, including requests for financial institutions to boost lending, is working at least for now.
Total bank lending by banks and “shinkin” credit unions rose 4.8% in May from a year earlier to 562.5 trillion yen ($5.13 trillion), accelerating from a 2.9% gain in April and marking the fastest pace of increase since comparable data became available in 2001, Bank of Japan data showed.
“The data shows a surge in corporate fund demand in response to the coronavirus pandemic,” a BOJ official told reporters, adding that rising credit costs so far haven’t discouraged financial institutions from lending.
Lending by major banks surged a record 6.6% in May, the data showed, as big companies borrowed more as a precaution in case the virus fallout persists, the official said.
Regional banks also saw lending rise 3.8%, reflecting surging demand by smaller businesses, the data showed.
Japan’s economy is in recession and analysts expect it to contract an annualised 22% in the current quarter as lockdown measures - put in place in April and lifted in late May - forced companies to close business and citizens to stay home.
The BOJ created in March a loan scheme aimed at encouraging financial institutions to lend to small firms, which has channeled 14 trillion yen into the economy so far.
Reporting by Leika Kihara; Editing by Kim Coghill