Japanese banks report stronger corporate funding demand despite recent rate hikes

In a survey conducted by the Bank of Japan from early September to mid-October, major Japanese banks indicated that corporate borrowers are seeking more financing than they were three months prior. The diffusion index, which compares banks reporting increased demand to those seeing a drop, rose to +3 from a previous -1, signalling a net rise in funding requests. This development follows the BOJ’s decision on September 18 to raise its policy rate to 1.25%, the highest level in 31 years, as part of a pivot toward preventing inflation from exceeding its 2% target.

The central bank emphasized that it will closely examine how these rate hikes influence corporate funding to determine when rates approach a neutral level for the economy. The findings suggest that, so far, the tighter monetary stance has not significantly constrained credit availability for firms.