Bank of Japan May End Rein On Lending
TOKYO -- The Bank of Japan may abandon its guidance on lending growth at commercial banks as of the July-September quarter, a central bank official said.
"The issue is still undergoing discussion," the official said, and the decision to continue the guidance or not was to be finalized by today.
The central bank believes there is less need now for such guidance as banks' attitudes toward lending have changed from the expansionism of a few years ago, he said. It has been checking banks' quarterly lending-growth plans, and this has functioned as a part of its grip on credit.
Asset Growth Restrained
Japanese banks have recently been restraining asset growth because of the capital adequacy standards set by the Bank for International Settlements (BIS), and because of the growing base of deregulated rate instruments in their funds. The central bank can now effectively control lending growth through its grip on short-term interest rates, bank officials said.
Short-term money rates have been higher than long-term rates for more than two years and have been squeezing profits for more commercial banks fund their long-term loans in the short-term money market or in market rate-linked deposits.