Bank of Japan warns of overheating in real estate loans

The Bank of Japan issued a warning for the first time in 20 years that financial institutions may be over-extending real estate loans, a sign that years of ultra-low interest rates is prodding banks to move into riskier lending to make profits. Nearly 60 percent of regional banks could suffer net losses a decade from now if corporate borrowing keeps falling at the current trend, the central bank said in a semi-annual report on Japan’s banking system on Wednesday. The report, which is among key factors the BOJ board will scrutinise in deciding monetary policy, highlights the mounting demerits of prolonged monetary easing such as the damage it is inflicting on financial institutions’ profits.