FAST FIVE: A Global Dearth Of Liquidity

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Stricter capital adequacy regulations are proving to be a considerable obstacle to bank credit expansion as well.

Another impediment to credit growth is the recent weakness in economic performance, which was presumably at least in part triggered by faltering confidence due to the pending “Brexit” and the spat between Italy and the EU Commission over the country's draft budget.

Here is a recent chart illustrating the situation: Actual JGB purchases by the BoJ (blue line) vs.

A number of remarkable data: recently the BoJ's balance sheet has eclipsed the country's GDP; real estate lending in Japan has grown rapidly; and so has lending to overseas clients, with both large international and regional banks in Japan amassing US dollar-denominated assets in size.

China¬†– Downtrend in Money Supply Growth Continues We recently discussed the situation in China in some detail (see “Eastern Monetary Drought”, which includes additional charts and background information), so we will only show an update of the y/y growth rates of M1 and M2 here.

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