UPDATE 1-Japan bank lending, deposits keep rising in Dec as pandemic strains persist

* Dec bank lending up 6.2% yr/yr to new record – BOJ data

* Total deposits surge as companies pile up cash

* Some firms holding back on capex, cutting costs – BOJ official (Recasts with milestone, details on loan increase and context on deposits)

TOKYO, Jan 12 (Reuters) – Japanese bank lending continued to rise in December to hit a fresh record, data showed on Tuesday, as companies kept piling up cash to weather the fallout from the coronavirus pandemic.

Outstanding loans held by the country’s four main categories of banks, including “shinkin” or credit unions, rose 6.2% in December from a year earlier to a record 577.6 trillion yen ($5.5 trillion), Bank of Japan data showed.

Total deposits at the banks also surged 9.3% to a record 802.9 trillion yen, as some companies parked the money they borrowed in their accounts for the time being, the data showed.

“Some companies were holding back on capital expenditure and cutting fixed costs,” which was also behind the increase in deposits, a BOJ official told a briefing.

Aside from lending, commercial banks were using the money from the huge deposits to increase purchases of short-term securities and government bonds, the official said.

The BOJ eased monetary policy twice last year to cushion the economic blow from COVID-19, including by creating a new lending facility aimed at channeling funds to cash-strapped firms via financial institutions.

While lending by cash-strapped firms has peaked, the government’s decision to impose new state of emergency curbs to prevent the spread of the virus has clouded the outlook for the world’s third-largest economy.

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