Bloomberg News

Bank Loans Rise First Time in Two Years on Quake Spending

October 12, 2011

(Updates with analyst comment in fourth paragraph.)

Oct. 12 (Bloomberg) -- Japan’s bank loans increased in September for the first time in almost two years as the country’s biggest earthquake and tsunami spurred lending for reconstruction.

Lending by 119 local banks led by Mitsubishi UFJ Financial Group Inc.’s unit rose 0.1 percent to 420 trillion yen ($5.5 trillion) as of Sept. 30 from a year earlier, the Japanese Bankers Association said in a statement today, the first year- on-year increase in 23 months.

Mitsubishi UFJ Chief Executive Officer Katsunori Nagayasu was among forecasters who predicted a recovery in lending following the magnitude-9 quake and tsunami on March 11. The rebound comes as Europe’s sovereign debt crisis raises concerns of slowing global economic growth and casts doubt on the health of some financial institutions.

“Regional banks are expanding loans to local municipalities, which seem to be shifting to bank loans from bond sales,” Katsuhito Sasajima, a Tokyo-based bank analyst at JPMorgan Chase & Co., said before the release of today’s statement. “To make this loan recovery sustainable, Japan needs much stronger lending requirements along with reconstruction efforts after the quake, and real growth in corporate capital spending.”

Major commercial banks such as Mitsubishi UFJ and its rival Sumitomo Mitsui Financial Group Inc.’s banking unit lent 177.4 trillion yen as of Sept. 30, down 2.1 percent from a year earlier, the lobby group said. Lending by 63 regional banks increased 2.1 percent to 158.3 trillion yen, the report shows.

The disaster triggered explosions at Tokyo Electric Power Co.’s nuclear plant in Fukushima, northern Japan, and led to reactor meltdowns. The country’s worst atomic plant incident hampered the operations of other reactors nationwide, making it difficult for utilities to sell bonds and instead prompting them to rely on loans.

Japan’s top five power companies and nuclear-plant operators are seeking a record 4 trillion yen in loans this year in part to finance rising costs for natural gas and coal, the two main thermal power plant fuels. That amount includes an emergency loan of about 2 trillion yen to Tokyo Electric granted immediately after the accident.

The Bank of Japan will unveil its lending data for September on Oct. 13. It uses a different method of analysis.

--Editors: Pavel Alpeyev, Katrina Nicholas

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net.


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