Japanese Home Loan Demand at Two-Year High After Negative Rates

Since the introduction of negative rates in January, demand from Japanese households for home loans has risen for two quarters and reached the highest level in July since the second quarter of 2014, according to a survey of bank loan officers by the central bank.

Key Points

  • Home loan-demand diffusion index rises to 13 in July from 4 in April
  • Overall demand from households climbed to 14
  • Demand from companies dropped to 4 from 5, while that from local governments increased to 3 from 0

Big Picture

The adoption of negative rates has driven down interest rates for loans, and the Bank of Japan has repeatedly said that the policy has been effective in stimulating loan demand. Although households seem to be responding, firms aren’t, and outstanding loans increased at the slowest pace in June since March 2013.

Analyst’s Takeaway

  • “Introducing negative interest rates was never going to stimulate corporate loan demand,” said Takashi Miura, an analyst at Credit Suisse Group AG in Tokyo. “This is evidence of that fact.”
  • “Banks, particularly regional banks, are eventually going to have to turn back to the domestic market,” Miura said. “That will mean focusing on home loan business,” adding that there’s been demand for refinancing at low interest rates.

The Details

  • Demand from large companies dropped 
  • Small and medium non-manufacturers had higher demand for loans
  • Zero represents an equilibrium point, with most people seeing demand as about the same as the previous quarter; numbers higher than zero indicate more people are seeing stronger demand, and below zero means that more people see weaker demand than three months ago