Outstanding loans in the Japanese banking industry rose 1.6% to $3.8 Trillion in May 2008 owing to healthy growth in the corporate sector and increasing sales of automobiles.
Japanese banking industry witnessed a 1.6% rise in outstanding loans, totaling US$ 3.8 Trillion in May 2008 compared to May 2007, according to the Bank of Japan (BOJ), as reported by Forbes.
The statistics given by BOJ showed that in spite of mounting fears that the country’s economy is being affected by the spiraling inflation due to rising energy costs, the lending levels in Japan are going up. The lending balance increased at the fastest rate since March 2007 to reach 2.1%.
The corporate sector was the main target in Japan annual fund lending in May 2008 due to the rising loans demand in the country. Moreover, the Japanese companies are taking additional loans to invest in the capital markets, compounding the outstanding loan demand to the highest level. The rising demand for outstanding loans is the result of an increased utilization of annual funds in the manufacturing industries.
Also, on account of rising cost of raw materials in the country, the companies are offsetting their loss by borrowing funds from banks. Due to this reason, manufacturing companies are becoming extremely insecure about the fast transforming business environment, which is forcing investors to take loans from the regional banks to keep them financially secure.
The improvement in the Japanese automobile industry is also responsible for the growth in annual fund lending in the country because manufacturers, together with customers, are taking loans for purchases. Thanks to the fall in interest rates, release of bank bonds and a shift in the Japanese banking sector towards privatization are impelling the major companies to take loan from the banks.
According to a Research Analyst at RNCOS, “Growth in annual lending in Japan indicates a rapidly changing corporate sector. The corporate sector is offering vast growth opportunities to insurance industry, and capital and fund management market. Besides, surging borrowing by the regional government and growth in mortgage loans is helping banks to sustain their growth.”
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