Lending by banks accelerated at its fastest pace in 16 years in December as the global credit crisis forced companies out of the corporate debt market.
Loans, excluding those by credit associations, rose 4.1 percent last month from a year earlier after jumping 3.6 percent in November, the Bank of Japan said. The growth rate was the fastest since February 1992 and the third straight monthly gain.
Banks boosted lending to the biggest companies after interest rates for firms issuing commercial paper surged following the September collapse of Lehman Brothers Holdings Inc. Lending by the 10 city banks, including Mitsubishi UFJ Financial Group Inc., rose 4.2 percent after climbing 3.4 percent in November.
"It's positive for banks in the short term as lending to blue-chip companies is increasing," said Naoko Nemoto, an analyst at Standard & Poor's in Tokyo. "Yet the increase shows companies are having difficulty issuing commercial paper and corporate bonds, illustrating the deterioration of the nation's economy and financial markets."
The shrinking global economy and strengthening yen have caused a record decline in exports by Japanese companies, which plunged 27 percent in November from a year earlier. Toyota Motor Corp. has announced an 11-day closure of its domestic plants.
Regional banks expanded lending 4 percent in December, compared with 3.8 percent a month earlier.
"Given the state of the economy and its outlook, banks may be taking risks beyond their capacity by increasing lending," said Mitsushige Akino, chief investment officer at Ichiyoshi Investment Management Co. "More lending potentially means more nonperforming loans."
The BOJ has cut interest rates twice since October, lowering the key lending rate to 0.1 percent from 0.5 percent.