UPDATE: Borderless Conventional Banking Failure

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No surprise that the BoJ kept rates unchanged at 0.1%. That a return to deflation is expected comes as no surprise either, since in reality, deflation never really ended, even when commodities surged last year. Meanwhile, the Japanese are left in the same predicament, with next-to-zero returns on deposits and no real need or desire to consume beyond necessities. Unenviable circumstances for both individuals and businesses, alike.

The “borderless conventional banking stupidity failure” refers to the clipped text below. With exports plunging and domestic demand continually depressed, it’s unnecessary to obsessively cater to the big players idling plants and curbing expansion. Rather it’s of utmost importance to ensure that lending not only continues, but does so without excessive stringency, at the SME and individual level, in order to have any hope of minimizing the effects of prolonged deterioration of the economy. This is a simplified argument, but the crux of the problem, especially in Japan (or I could say “even in Japan” despite all the cash held by companies and individuals — innate risk aversion exacerbates the problem). And again, a truly unenviable situation (regarding the lending climate), but in this case, one not so different than what we are witnessing, say for instance in the U.S.

clipped from www.marketwatch.com

BoJ holds rates unchanged; sees deflation ahead

The BoJ’s quarterly survey of bank-lending practices, released on Thursday, showed large financial institutions lowered lending standards for large firms, kept them unchanged for medium-sized firms and tightened them for small firms and households.

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