The Failure of 'Borderless Conventional Banking'

No surprise that the Bank of Japan 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.

“Borderless conventional banking stupidity” refers to the text below. With exports plunging and domestic demand continually depressed, it’s unnecessary to obsessively cater to the big players readying to idle plants and curb 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. And again, a truly unenviable situation.

From 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.