Japan’s New Loans for Investment Climb 7.1% in First Quarter

Japan’s new loans for fixed investment rose 7.1 percent in the first three months of the year, the sixth straight quarterly gain, helped by increased borrowing from non-manufacturing, logistics and welfare companies.

The borrowing totaled 12.1 trillion yen ($118 billion) in the three months to March 31, the highest level since the first quarter of 2008, according to a statement from the Bank of Japan today. Lending to non-manufacturing companies, which accounted for half of the total, rose 14 percent to 6.15 trillion yen, while loans to logistics companies jumped 30 percent to 705.1 billion yen, the data show. Loans to manufacturers accounted for 603.2 billion yen, a 1.7 percent decline from last year.

Prime Minister Shinzo Abe, who came to power in December, vowed last week to increase private investment and infrastructure exports as part of his strategy to end more than a decade of deflation and spur growth in the world’s third-largest economy. The numbers released today don’t reflect the central bank’s April 4 announcement of an unprecedented stimulus that sparked a 22 percent advance in the Topix Index of shares and depreciated the yen to the weakest since October 2008.

“We are at a turning point,” said Hiroshi Ikari, the chief manager of economic and industrial research at Development Bank of Japan Inc. “Capital spending is rebounding from the austerity of the past few years and the economic recovery signs all point to an increase in outlays this fiscal year.”

Exporter Spending

Honda Motor Co., Toshiba Corp. and Mitsubishi Electric Corp. are among exporters which announced plans to increase investment this fiscal year. Honda Motor, targeting to sell a record number of vehicles this year, plans to bolster spending 18 percent to 700 billion yen in the year ending March 2014, it said last month. The automaker is focusing on investing in factories in Mexico and Thailand, it said.

“We want to establish operations” in these newly developing countries as soon as possible, Tetsuo Iwamura, Honda’s executive vice president and chief operating officer for North America, said at an April 28 briefing.

The central bank has doubled government bond purchases to more than 7 trillion yen a month, marking an expansion of monetary stimulus that was larger than analysts expected and one that is aimed at achieving 2 percent inflation in two years.

Abe said in a speech in Tokyo May 17 he aims to get annual private investment back to 70 trillion yen, the level before the 2008 financial crisis, via deregulation, taxes, spending, and equipment leasing deals. He also outlined a target of tripling infrastructure exports to about 30 trillion yen by 2020. Abe has said he will reveal his full growth plan ahead of the Group of Eight summit in Northern Ireland on June 17-18.

Japan’s first-quarter gross domestic product increased an annualized 3.5 percent, versus 1 percent growth in the last three months of 2012, according to the Cabinet Office numbers. The economy is expected to expand 3 percent in the current three-month period, according to data compiled by Bloomberg.