BoJ frets over real estate lending boom
TOKYO: The Bank of Japan (BoJ) said yesterday it is closely monitoring bank lending to the real estate sector to guard against excessive credit that could lead to overheating and pose risks to financial stability.
The BoJ does not currently see signs of a property bubble, according to a report it released yesterday.
However, the central bank is concerned because the ratio of real estate investment to nominal gross domestic product is uncomfortably high and banks are extremely willing to extend loans to property developers.
The BoJ also expressed concern about falling yields on office buildings in major cities, which suggests that investors have driven prices too high, the report showed.
Despite Japan struggling with low growth and depressed domestic consumption, property development has stood out, being one of the biggest beneficiaries of the increased lending, setting of a wave of residential and office development in Japan’s largest cities.
The BoJ said commercial banks’ capital adequacy ratios are high enough to withstand financial shocks, according to the report. – Reuters