l support of banks in 1990-1998 was about 140 trillion yen.2001 the Central Bank adopted quantitative easing. To promote private lending Bank of Japan provided commercial banks with excess liquidity. The Bank of Japan accomplished this by buying government bonds, asset-backed securities, equities and commercial paper. The Bank of Japan increased the commercial bank current account balance from 5 trillion yen to 35 trillion yen (approximately US $ 300 billion) over a four-year period (Glen Allen 2010).
The fifth phaseliquidity into banks increases the risk of inflation in the economy. Although in the economy deflationary trend dominates (because of high levels of debt (debt deflation) and the growth of savings due to high uncertainty), at the stage of the recovering of business confidence and economic growth, lending and consumption growth will dramatically increase the risk of inflation. It should also be noted that in situation lending and private spending declines, government to prevent the decline in GDP has to increase their costs constantly. Since fiscal revenues during the crisis reduce, increase of government spending is accompanied by rising public debt. In particular, Japan's public debt exceeds 200% of GDP and about 50% of state budget revenue is generated by government bond issues, debt service is constitute 24% of the state budget, even assuming average interest cost on debt remains unchanged from today s levels , Japan s debt service will increase to 50% of the state budget by 2032 (Ron Rimkus 2012) .high level of debt even a minor increase in interest rates will lead to the bankruptcy of the debtors and state.
· Increase of interest rates will reduce the value of assets that deteriorate borrowers balances and deepen debt crisis.
· Growth of interest rate will increase the interest expenditures of budget., the Japanese government should be very careful in trying to stimulate economic growth, as economic growth prompting interest rate rise will lead to decoupling of debts of private sector from their assets and cause a budget crisis.
It should be noted that similar process occurs in the United States, where the mortgage crisis and the decline in property prices (figure 5) observed since 2007 causes a decrease in value of borrowers assets in comparison with debts that leads to a decrease in lending activity.
Figure 5. The price of apartments in the United States, 2006=100
a result, if before the crisis, the volume of bank loans and deposits in the United States were comparable, in the crisis years, volume of deposits began to exceed bank loans: in 2008-2012, while deposits rose by 30%, lending fell by 9%. So, in June 2013 the volume of deposits exceeds the volume of loans 2.1 trillion dollars (Figure 6) which means the withdrawal of funds from the circulation and their accumulation in the banking sector (liquidity trap occurs).
Figure 6. Loans and deposits in the US, end of period, trillion dollars
save banks the Federal Reserve started buying bank debt, mortgage-backed securities, and Treasury notes (Quantitative Easing programme). In September +2012 third round of QE was announced. During QE3 FRS purchases bond to the amount of $ 85 billion per month.
As a result of QE programmes, the amount of cash of commercial banks (vault cash, cash items in process of collection, balances due from depository institutions, and balances due from Federal Reserve Banks) in the United States increased from 296 billion dollars at the end of 2006 to 1,710 billion at the end of 2012, or from 3% of total assets of banks to 13.1% (Figure 7).
Figure 7. Cash (vault cash, cash items in process of collection, balances due from depository institutions, and balances due from Federal Reserve Banks) in commercial banks in the United States, end of periodcrunch forces banks to decrease the demand for deposits which leads to low interest rates. In December 2012 bank prime loan rate was 3.25%, certificate of deposits rate was 0.32% (Figure 8).
Figure 8. Interest rates in US,%
similar situation is also observed in the euro area, where in recent years growth of deposits exceeds the growth of lending (Figure 9). So, in 2009-2012 deposits in euro area increased by 14%, but lending increased by less than 1%.
Figure 9. Annual growth rate of loans and deposits in the US, in%
with the placement of funds attracted by banks forced banks to lower interest rates on both loans and on deposits (Table 1).
Table 1rates on loans and deposits,%
loans ...
