Japan's Corporate Loan Demand Falls to Four-Year Low

By Toru Fujioka

July 22 (Bloomberg) -- Demand for loans among Japanese companies fell to a four-year low as a slowing economy and costlier materials made businesses reluctant to borrow.

An index of corporate loan demand dropped to minus 14 this month from minus 2 in April, the lowest since July 2004, the Bank of Japan said in a quarterly survey of loan officers in Tokyo today.

``This indicates sluggish growth in business investment, wages and hiring,'' said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo. ``Companies can't be confident about borrowing money amid the higher costs.''

The Bank of Japan cut its assessment of the economy last week, saying growth is slowing ``further'' because of rising commodities prices. Sentiment among large manufacturers fell to a four-year low in June and big companies said they expect earnings to drop for the first time since the 2001 recession.

Loan demand among large companies declined to minus 4 in July from 4 three months ago, today's survey showed. The index for mid-sized companies slid to minus 8 from 1, and for small businesses dropped to minus 16 from minus 4.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net