A closer look at Japanese bank lending in Asia

As the IMF noted in its recent Article IV consultation, Japanese banks have been expanding abroad, particularly in emerging Asia. They have not been alone in doing so, but unlike banks from other developed economies, they have continued to increase lending as the euro-zone crisis has worsened. Japan’s banks are now well placed for further expansion in Asia if others withdraw, even in the event of a global credit crunch. The downside is that the strength of Japanese financial system is one of the reasons for the safe haven status of the Japanese currency. Any further escalation in the euro-zone crisis will therefore add to the upward pressure on the yen.