Hitting the Gas on Japan’s Belt and Road

A large eastern economy’s financial presence in emerging Asia is mushrooming. No, not that one.

In data on overseas credit released this week, the Bank for International Settlements recorded booming growth in cross-border credit in one particular currency: the Japanese yen. Outstanding yen borrowing overseas rose 12.5% in the first quarter of 2019 compared with the same quarter last year, far faster than the U.S. dollar or euro. That pushed the total above 50 trillion yen ($466 billion) for the first time in 8 1/2 years.

The growth is most rapid among Japan’s neighbors: In the 12 months to March, credit to emerging economies in Asia and the Pacific rose 32.8%, reaching 6.58 trillion yen—far and away the highest ever. Most of lending is private, but much is assisted by the Japan Bank for International Cooperation, a government-owned institution.

The Bank for International Settlements recorded booming growth in cross-border credit in one particular currency: the Japanese yen.


kazuhiro nogi/Agence France-Presse/Getty Images

Of course, in total volume the yen is still a marginal player compared with the mighty greenback. Dollar-denominated cross-border credit is more than 20 times as large.

But the speed of the increase matters in Asia, where overseas credit for major projects often comes from either Japan or China. Though Beijing’s Belt and Road program has garnered far more headlines, Japan’s lending to its poorer neighbors is more expansive than China’s, and is growing more quickly.

The Bank for International Settlements’ data doesn’t break down figures into currencies with as little international use as the Chinese yuan, which accounts for less than 2% of international payments, according to financial network Swift. But the bank’s nationality-based data showed Chinese bank lending overseas was up $45.75 billion in the first quarter of the year. Japanese lending rose $222.51 billion.

The fact that Japan is able to lend overseas in its own currency—something China has struggled to replicate—is perhaps the most important factor. It makes it more likely that Japan’s borrowers will use Japanese contractors for major infrastructure projects. Japanese banks also don’t have a finite supply of yen in the way that Chinese banks have a finite supply of dollars.

As long as borrowers are happy to receive yen, and the lending is financially viable, the sky’s the limit for Japanese credit in the rest of Asia.

Write to Mike Bird at Mike.Bird@wsj.com

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