Large Japanese banks reported a slight pickup in corporate loan demand in the Bank of Japan's October 2026 senior loan officer survey, while demand from local governments weakened. The diffusion index (DI) for firms was 3 percentage points, against -1 in the previous survey. For local governments it was -4, down from 3, and for households 5, up from 3.
The index subtracts the share of banks reporting weaker demand from the share reporting stronger demand, counting "substantially" answers in full and "moderately" answers at half weight.
Most banks saw no change
The Bank of Japan surveyed 50 banks between September 9 and October 13, 2026. The central bank says they are the 50 largest by average loans outstanding and together hold about 80% of loans outstanding at domestically licensed banks and shinkin banks.
On firms, 5 banks (10%) said demand was moderately stronger over the past three months, 43 (86%) said about the same and 2 (4%) said moderately weaker. On local governments, 47 banks said about the same, 2 said moderately weaker and 1 said substantially weaker. On households, 1 bank said substantially stronger, 4 moderately stronger, 44 about the same and 1 moderately weaker.
| Borrower | October 2026 DI | Previous survey DI |
|---|---|---|
| Firms | 3 | -1 |
| Local governments | -4 | 3 |
| Households | 5 | 3 |
Firm size and sector
The firm-side improvement reached all three size bands. The DI for large firms was 5 (previous survey: 2), for medium-sized firms 1 (previous: -2) and for small firms 1 (previous: -2).
Among manufacturers, large firms scored 7 (previous: 1) and small firms 3 (previous: -2). Medium-sized manufacturers went the other way, to 0 from 7.
Construction and real estate showed the widest swings. Large firms scored 14 (previous: 1), medium-sized firms 8 (previous: -10) and small firms 7 (previous: -3).
Next three months
Looking ahead, 12% of banks expected demand from firms to increase somewhat over the next three months and the rest expected it to stay about the same. The outlook DI for firms was 6, against 4 in the previous survey.
With 86% of banks reporting no change in firm demand, the move in the index rests on a handful of respondents: 5 banks reporting stronger demand against 2 reporting weaker.