Bank lending in Japan increased at the fastest rate since the Covid-19 pandemic, thus showing that the country's economy is still in a strong state.
According to a report by the Bank of Japan (BOJ), the total amount of loans disbursed by banks increased by 6.3% in June compared to the same period last year.
This is the highest growth since August 2020 and is driven by an increase in loans for company mergers (M&A), the real estate sector and the economic recovery.
This development indicates that financial institutions in Japan are still active in disbursing credit to businesses and consumers despite the increase in interest rates.
In fact, this situation strengthens the BOJ's confidence that the country's financial system is still supporting economic growth and has room to continue raising interest rates if necessary.
Last month, the BOJ raised its benchmark interest rate to 1%, the highest level since 1995. Despite the increase in borrowing costs, demand for loans remains strong.
This shows that companies continue to invest to expand their businesses, while consumers are still spending and carrying out economic activities as usual.
This situation gives the impression that the Japanese economy is able to adapt to tighter monetary policy.
In addition, the BOJ's Tankan survey also found that the financial position of companies is improving.
Large companies also reported that the process of obtaining financing through the issuance of commercial paper is now easier than before.
Despite the increase in interest rates, Japan's real interest rate is still negative after taking inflation into account. This means that the country's monetary policy is still supporting economic growth.
At the same time, Japanese bank shares have jumped almost 90% over the past year, reflecting investor confidence in the prospects for the financial sector.
Since March 2024, BOJ Governor Kazuo Ueda has raised interest rates five times and indicated that this move will continue if the economy and inflation continue to grow as expected.
In fact, some analysts now expect Japanese interest rates to rise to between 1.75% and 2.5% over the next few years if economic momentum remains strong.
