* Bank lending rises 6.4% in September vs 6.7% in August

* Major banks’ lending slows as big firms pay back loans

* Smaller borrowers continue to rely heavily on lending

(Adds details, quotes from BOJ briefing)

By Chris Gallagher and Leika Kihara

TOKYO, Oct 12 – Japanese bank lending rose at a slower
annual pace in September than the previous month as corporate
funding strains caused by the pandemic eased mainly among big
borrowers, central bank data showed on Monday.

But lending by regional banks remained high as smaller firms
continued to borrow heavily to meet immediate funding needs, the
data showed, underscoring the lingering economic pain brought by
the health crisis.

“Big companies that had borrowed huge amounts of funds as a
precaution around spring are now paying back some of the loans
due to easing uncertainty over the pandemic,” a BOJ official
told a briefing.

“But that’s not to say conditions have improved. There are
gaps among industries on how much their profits have recovered.”

Total bank lending rose 6.4% in September from the same
month a year earlier, slower than a 6.7% gain in August, to a
record 573.7 trillion yen ($5.43 trillion), Bank of Japan data
showed.

The pace of lending by major banks slowed to 7.3% in
September from 8.0% in August.

Lending by regional banks rose 5.3%, roughly unchanged from
the previous month’s 5.4% increase. Those by “shinkin” credit
associations, which lend mostly to small firms in regional areas
of Japan, rose 7.8%, the fastest pace on record, the data
showed.

Bank deposits rose 9.0% in September from a year earlier,
the biggest increase on record, as households held back on
spending and instead saved government pay-outs aimed at
cushioning the blow from the pandemic, the official said.

($1 = 105.6300 yen)

(Reporting

TOKYO (Reuters) – Japan’s core machinery orders likely fell in August, a Reuters poll found on Friday, reversing the previous month’s gain as the coronavirus pandemic weighed on business investment.

Worsening earnings have discouraged businesses from investing, with the world third-largest economy only just emerging from its worst post war contraction.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, likely slipped 1.0% in August from the previous month, the poll of 17 economists showed. The fall would follow a 6.3% gain in July.

From a year earlier, core orders, which exclude those for ships and electrical utilities, are projected to have fallen 15.6% in August following a 16.2% drop in July.

“A rapid deterioration in corporate earnings and uncertainty over the outlook will prompt firms to refrain from carrying out business investment,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“There may be IT-related investment by firms going ahead, but overall business investment is expected to be weak.”

The Cabinet Office will release the machinery orders data at 8:50 a.m. on Monday, Oct. 12 Tokyo time (2350 GMT Oct. 11).

The Bank of Japan’s corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services, likely fell 0.5% in September from a year earlier, the poll found, reflecting weak domestic demand.

(Reporting by Kaori Kaneko; Editing by Sam Holmes)

Copyright 2020 Thomson Reuters.

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By Kaori Kaneko and Izumi Nakagawa

TOKYO (Reuters) – Japan may need to consider compiling another extra budget to help its economy if the current reserve fund is not enough to respond to the coronavirus pandemic, a senior ruling party lawmaker said on Friday.

Hakubun Shimomura, the policy research council chief for the Liberal Democratic Party (LDP), said the reserve would likely be enough to cover support for the economy in 2020. A third extra budget could come as early as next year if reserve funds become insufficient.

“If 10 trillion yen of budget reserve is not enough, the government may need to compile a third extra budget,” Shimomura said in an interview with Reuters.

Japan’s economy suffered its biggest slump on record in the second quarter due to impact of the coronavirus. To soften the blow, the government has delivered two stimulus packages this year totalling 234 trillion yen ($2.21 trillion), or about 40% of Japan’s gross domestic product.

The government is tapping a pool of funds, set aside under the packages, to meet the cost of battling the pandemic. But some lawmakers are calling for another spending package as the economic pain persists.

Shimomura said that the party was not discussing a possibility of cutting the sales tax, which the government raised to 10% last October from 8%.

Nor had the party discussed whether the BOJ should cut its already negative interest rates further, Shimomura said, but he believed the party’s research commission on the finance and banking systems would discuss the issue.

The Bank of Japan has ramped up stimulus twice so far this year and created a lending facility to channel funds via banks to cash-strapped smaller firms.

Shimomura dismissed speculation that Prime Minister Yoshihide Suga would call a snap election to secure his own mandate

(Bloomberg) — The Bank of Japan said it aims to start early phase experiments next year on issuing a digital currency in order to be ready should demand for one rise quickly.



a group of people walking on a city street: Pedestrians walk past the Bank of Japan (BOJ) headquarters at dusk in Tokyo, Japan, on Monday, Sept. 14, 2020. The Bank of Japan left its bond-purchase amount unchanged at a regular operation on Monday.


© Bloomberg
Pedestrians walk past the Bank of Japan (BOJ) headquarters at dusk in Tokyo, Japan, on Monday, Sept. 14, 2020. The Bank of Japan left its bond-purchase amount unchanged at a regular operation on Monday.

“From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner,” the BOJ said in a report released Friday.

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While the BOJ reiterated it has no immediate plans to issue a digital currency, today’s report suggests it is trying to keep up with peers including the People’s Bank of China, which has been studying the topic for years and in April gave the green light for some lenders to conduct internal, hypothetical-use tests of a digital yuan.

Read More: Japan Seen Needing U.S. Help to Check China’s Digital Yuan

Japan’s Finance Minister Taro Aso in February expressed concern over China’s ambitions and senior ruling party lawmaker said a digital yuan would be a challenge to the existing global reserve currency system.

Most central banks that have been looking at the issue of digital currencies are treating it with caution because the risks of getting things wrong are significant. Depending on the model of central bank digital currency, authorities risk either cutting out commercial banks, a vital funding source for the real economy, or assuming the direct risks and complications of being in the banking business.

Video: Consumer sector to remain China’s key focus in the upcoming five-year plan: Analyst (CNBC)

Consumer sector to remain China’s key focus

TOKYO (Reuters) – Japan Airlines <9201.T> wants to create a low-cost carrier network with three of its discount carriers to tap leisure travel that, unlike business travel, could rebound as the coronavirus wanes, the company president said on Wednesday.

“Aviation won’t return to what it was before and business travel demand could even shrink further. One of our targets is tourism,” Yuji Akasaka told a media briefing.

Japan Airlines’ three low-cost regional carriers include Jetstar, which it operates with Qantas Airlines,

, Spring Airlines Japan, a joint venture with China’s Spring Airlines <601021.SS>, and its wholly owned ZIPAIR unit.

Akasaka did not say whether Japan would seek to formally merge their operations through acquisitions.

Japan Airlines, like other carriers, has been hammered by a collapse in international air travel to about a tenth of what it was before the coronavirus outbreak, but has seen domestic flight demand rebound helped by a government campaign to promote tourism.

“The impact of that campaign has been significant and in late September going into October we are seeing traveler numbers increase to about 50% of what they were a year ago,” Akasaka said.

To survive the downturn in demand, which Japan Airlines expects to last until at least 2024 on international routes, Akasaka said the carrier would look to boost revenue from non-airline businesses such as drone parcel deliveries.

Japan Airlines last month announced a tie-up with Matternet, to launch the U.S. company’s urban drone logistics business in Japan. This year, it also invested in a German start up, Volocopter, that is developing air taxis.

(Reporting by Maki Shiraki; Writing by Tim Kelly; Editing by Jacqueline Wong, Robert Birsel)

Copyright 2020 Thomson Reuters.

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