Japan

Japanese bank lending rose 1.8% in July from a year earlier, accelerating from the previous month, as some companies borrowed more to meet rising raw material costs amid a surge in global commodity inflation, Reuters reported. Outstanding loans held by the country's four main categories of banks, including "shinkin" or credit unions, hit a record 588.232 trillion yen ($4.36 trillion), Bank of Japan (BOJ) data showed on Monday.

The Bank of Japan won't make any quick or drastic changes to its monetary policy framework and is likely to keep interest rates low, even as this week's board reshuffle brought in less dovish members, former BOJ policy board member Sayuri Shirai said on Tuesday, Reuters reported. "Japan's neutral rate is very low... Together with inflation expectation, Japan's nominal interest rate will be low," Shirai told the Reuters Global Markets Forum (GMF).

Japan's government slashed its economic growth forecast for this fiscal year largely due to slowing overseas demand, highlighting the impact of Russia's war in Ukraine, China's strict COVID-19 lockdowns and a weakening global economy, Reuters reported. The forecast, which serves as a basis for compiling the state budget and the government's fiscal policy, included much higher wholesale and consumer inflation estimates as surging energy and food costs and a weak yen push up prices.

U.S. Treasury Secretary Janet Yellen and Japanese Finance Minister Shunichi Suzuki agreed on Tuesday to work together to tackle rising prices of food and energy, as well as volatility in currency markets, exacerbated by Russia's war in Ukraine, Reuters reported. They said that the war had raised exchange rate volatility, which could pose adverse implications for economic and financial stability, and pledged to cooperate "as appropriate" on currency issues.

Japan spent nearly 30 trillion yen less in the last fiscal year than it had planned for a second year running, which analysts said raises questions about whether stimulus measures like those adopted during COVID-19 could be implemented more efficiently, Reuters reported. The Ministry of Finance said on Tuesday there was an excess of some 22.4 trillion yen ($161.41 billion) in the budget for fiscal year 2021, which ended in March, mostly unspent pandemic support funds.

Japan's services sector activity expanded at the fastest pace in over eight years in June as the easing of coronavirus curbs boosted sentiment among businesses such as those in tourism, Reuters reported. The pick-up in activity is welcome news for a government betting on domestic demand to put the world's third-largest economy firmly on a recovery track and help overcome production pressures on the country's manufacturing industry.

Japan's factory output posted the biggest monthly drop in two years in May as China's COVID-19 lockdowns and semiconductor and other parts shortages hit manufacturers, adding more pressure on an economy struggling to mount a strong recovery, Reuters reported. The decline also highlights the challenge the world's third-largest economy faces in overcoming supply disruptions and persistently high prices of raw materials and energy that analysts say could weaken global demand.

Struggling Japanese auto parts supplier Marelli Holdings said Friday it has filed with Tokyo District Court for a simplified bankruptcy protection procedure under Japan’s civil rehabilitation law, the Japan Times reported. Marelli, based in the city of Saitama, is saddled with liabilities totaling ¥1.133 trillion, which makes it the second largest failure of a Japanese manufacturer since World War II only to now-defunct Takata, which left ¥1.5 trillion, according to Tokyo Shoko Research.

Central banks around the world are raising interest rates rapidly, except one. The Bank of Japan affirmed on Friday that it wanted rates around zero, even if investors are using that as a reason to sell the yen, the Wall Street Journal reported. “It is not appropriate to tighten monetary policy at this point,” said Gov. Haruhiko Kuroda. “If we raise interest rates, the economy will move into a negative direction.” Japan’s outlier status partly reflects its less-serious inflation problem—prices rose 2.5% overall in April, compared with more than 8% recently in the U.S.