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“Snap! Crackle! Pop!”


FX Trading – Japan Snaps? China Crackles? Canada Pops?

TOKYO, May 13 (Reuters) – Japanese bank lending fell in April from a year earlier, matching the biggest decline in four years and showing that companies’ funding needs remain weak despite an economic recovery and recent easing steps by the central bank.

To stimulate more spending in new business areas, the Bank of Japan said last month it would consider new ways to bolster growth and many analysts expect a new facility aimed at banks that make loans to areas with growth potential.

But they also believe such a scheme is unlikely to pull Japan out of its current liquidity trap, with companies and consumers so pessimistic about the economic outlook that no amount of cheap funding coaxes them to borrow.

Japan is trying to make credit easy but it likely won’t have the intended effect. What’s new?

But what about credit in the rest of the world? Can we garner any investment clues?

United States – Recovering after the worst decline in the last thirty years?

Eurozone – Ditto?

UK: Ditto?

Canada: Rather resilient, eh?

Japan: Finding a bottom any time soon?

Australia: Finding a happy place?

China: Cracking down on loans?

In all these charts we’re not focusing on the decline – everyone knows the credit crunch that commenced in 2008 was unprecedented. We’re looking for a change in trend.

The US is working on a bottom, as credit is being extended a bit more freely. Australia seems to be in the same boat. Australia’s economy has been in a better place than the US economy, but perhaps this nascent rebound indicates a revival in economic activity for the US too.

For the Eurozone and the UK, the improvements don’t seem quite as far along.

Japan seems as though they’ll try to force through more stimulative lending. But it’s a question of whether that’s going to make any difference.

China is making another go at stamping out excessive lending and speculation. The question here is: how much of an impact will a decline in lending and credit be on China’s growth numbers?

Credit in Canada held up rather well after global credit markets were flushed down the toilet in 2008. A lot of it had to do with the exposure of Canadian banks – they did not rush to take on the same junk, the same risks that so many other developed world banks did. But something to keep in mind as countries look to rejuvenate credit markets after massive deleveraging …

Canada boasts the seventh highest debt-to-income level in the world. And when comparing consumer debt to financial assets, Canada “earns” the #1 spot.

A Canadian friend of ours sent us this on Tuesday:

“A new report concludes that Canadians are among the most indebted people living in advanced countries.

“The report by the Certified General Accountants Association of Canada finds that household debt reached $1.41 trillion in December 2009.

“That’s $41,740 on average per Canadian and is worst among 20 advanced countries in the OECD.

“The accountants note that Canadians kept adding on debt during the recession when interest rates were at record lows.

“Now, with higher rates expected, they warn that those households would need to tighten their belts if mortgage rates rise even by just two percentage points.

“The report says mid-income and even higher-income households would have to cut their budgets on other expenses by between nine and 11 per cent to maintain the same levels of spending on shelter, food and transportation.”

Is this due to bite now that the worst is behind Canada’s counterparts?