Bank lending continued its decline in July but fell at its slowest pace since September 1998, the Bank of Japan said Monday.

The average daily balance of lending at banks for the month fell 2.4 percent from a year ago to 377.12 trillion yen, the 91st consecutive month of decline, according to the central bank.

The figure covers "city" banks with nationwide branch networks, trust banks, long-term credit banks, regional banks and second-tier regional banks.

With "shinkin" savings-and-loan banks included, the balance of loans dropped 2.1 percent to 438.50 trillion yen, for the 55th consecutive month of decline.

But the margin of decline contracted for the second month in a row and was the smallest since January 2001, when comparable data was first compiled.

Adjusted for special factors -- loan securitization, exchange-rate fluctuations and the allocation of loan-loss reserves -- the loan balance, excluding loans by shinkin banks, edged down 0.1 percent to 386.01 trillion yen.

Before adjustment for special factors, the loan balance dropped 5.1 percent at city banks, long-term credit banks and trust banks but grew 2.6 percent at regional banks, up for the 10th successive month.

The outstanding balance of commercial paper at the end of July rose 7.4 percent from a year before to 16.20 trillion yen.

The average daily balance of lending by foreign banks operating in Japan, however, sank 14.0 percent to 3.95 trillion yen, after plunging 23.8 percent in June.