BOJ survey: Loan demand stable, credit standards ease slightly in outlook

The July 2026 Senior Loan Officer Opinion Survey from the Bank of Japan reveals a largely stable lending environment across Japan's large banks.

Demand for loans from firms, local governments, and households remained 'about the same' for the vast majority of respondents, with 86% to 90% selecting this option.

The Diffusion Index (DI) for overall loan demand registered -1 for firms, and +3 for both local governments and households, indicating minimal shifts.

Similarly, credit standards for approving loan applications for both firms and households were reported as 'remained basically unchanged' by 90% to 96% of banks.

The DI for credit standards for large firms stood at +5, medium-sized firms at +3, small firms at +2, and households at +3, suggesting a slight net easing, though predominantly stable.

Looking ahead, banks expect loan demand from firms to 'increase somewhat' over the next three months, while demand from local governments and households is projected to 'remain about the same'.

Credit standards for all borrower types are anticipated to 'ease somewhat' in the upcoming quarter.

Analysis by borrower type reveals specific trends.

Demand from small and medium-sized manufacturing firms was slightly weaker, while medium-sized non-manufacturing firms experienced a moderate increase.

For households, housing loan demand was moderately stronger, contrasting with stable consumer loan demand.

Banks easing credit standards primarily cited 'more aggressive competition from other banks' (average rating 2.67 for large firms) and a 'more favorable economic outlook' (2.33).

Conversely, decreased loan demand was often attributed to 'customers' internally-generated funds increased' (2.50 for large firms) and 'customers' fixed investment decreased' (2.00).

Spreads of loan rates over banks' cost of funds increased for 14% of low-rated firms, indicating some differentiation in pricing.