BASEL, Switzerland - International lending declined in the second quarter because Japanese banks withdrew from the market, the Bank for International Settlements reported.

In a quarterly report, the settlements bank said international lending by reporting banks - in North America, Western Europe, and Japan as well as the offshore branches of U.S. banks - dropped by $60 billion in the quarter that ended with June.

Banks outside Japan slightly increased their international lending. But Japanese banks, facing poor conditions in international and domestic operations, virtually withdrew from the world market, the report said.

Banks covered by the report had reduced their lending by $52 billion in the preceding three months.

"The retrenchment of Japanese banks in the international market continued unabated and was the main factor accounting for the overall contraction of gross banking aggregates in the second quarter," the settlements bank reported.

U.S. Segment Climbs

Lending between banks in the United States and elsewhere rose by $11 billion in the second quarter. Intra-European lending, which had declined in the first three months because of the New Year's lull, picked up by $16 billion, the report said.

The European lending was most concentrated in the French franc, the Dutch guilder, and the Spanish peseta. The dollar and the yen, favored currencies of the Japanese banks, saw little action in Europe.

The report also said Iran continued its aggressive policy of borrowing from members of the settlements bank, taking in another $1 billion in the second quarter alone.

The activity brought Iran's total indebtedness at the end of June to $8.3 billion - more than twice what it owed 12 months earlier.

Soviet Fallout

The republics of the former Soviet Union continued to slide deeper into debt, not because they are borrowing more but because their debt-service arrears increase every month, the report said.

But Hungary, which is now running a surplus in payments, cut its external indebtedness to a modest $3.9 billion, the report said.

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