Japan's bank lending slows amid uneven corporate recovery

By Leika Kihara

TOKYO (Reuters) - Japanese bank lending rose at a slower annual pace in October than the previous month as some big firms began paying back loans, a sign corporate funding strains triggered by the coronavirus pandemic were easing.

But "shinkin" credit union type banks, which cater to small- and medium-sized firms, continued to lend at a record pace, suggesting the wall of money pumped out by the Bank of Japan has yet to reach borrowers most vulnerable to the hit from COVID-19.

"We're beginning to see a contrast among sectors. Fund demand among big firms appears to have peaked," a BOJ official told a briefing. "On the other hand, shinkin banks continue to see lending rise due to demand by smaller firms," he said.

Total bank lending rose 6.2% in October from the same month a year earlier, slower than a 6.4% gain in September, BOJ data showed on Tuesday.

The pace of lending by major banks, which mainly deal with big firms, slowed to 6.7% in October from 7.3% in September.

Lending by regional banks rose 5.2% in October, roughly unchanged from the previous month's 5.3% increase.

Shinkin banks' lending rose 8.0% in October, the fastest pace on record, the data showed.

The BOJ eased monetary policy twice this year to cushion the economic blow from COVID-19 and created a new lending facility aimed at channeling funds to cash-strapped firms via financial institutions.

(Reporting by Leika Kihara; Editing by Sam Holmes)