Japanese banks are facing an unprecedented challenge as loan growth now exceeds deposit growth, reversing a decades-long trend driven by deflation and cash hoarding, Bloomberg News reported on Wednesday, citing industry officials.
A surge in borrowing, fueled by rising corporate capital investment and larger buyout deals, pushed outstanding loans up 5.4% year-on-year in April, while deposits grew only 1.9%, the news wire said.
This imbalance could potentially restrain lending and force banks to seek more expensive alternative funding sources, the publication said.
Sumitomo Mitsui Financial Group (TYO:8316) CEO Toru Nakashima said lenders must become more selective, a stark contrast to the past when abundant deposits allowed aggressive lending, the report said.
A senior official from Japan's Financial Services Agency noted that the regulator is closely watching this trend, as it was not a major concern until recently, it added.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)