The Japanese Bankers Association, a leading bank lobby, has said that the policies of Prime Minister Shinzo Abe are most likely to boost business confidence and encourage capital spending in the country.

Takeshi Kunibe, the new head of the Japanese Bankers Association urged the government to begin deregulation in order to boost demand for loans in the Japanese economy. He replaced Yasuhiro Sato today as chairman of the Japanese Bankers Association. He said that the recovery of the Japanese economy will depend upon structural and regulatory reforms.

Kunibe said, "Domestic lending is turning around, but it isn't strong just yet. We hope Abe's policies will bolster business confidence and encourage companies to increase capital spending."

The demand for credit in the Japanese economy has been affected due to deflation and a high exchange rate. The situation has prevented the country from boosting its domestic consumption in recent years.  Bank of Japan (BOJ) is facing pressure from the new government of Prime Minister Shinzo Abe to show to the market players that it is willing to take bold steps to ease monetary situation in the country.

BoJ is also offering unlimited loans to banks in the country boost domestic demand and encourage lending. According to the data released by the BoJ, the total domestic loans from banks including Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui and Mizuho Financial Group have increased 1.1 per cent to 198 trillion yen or $2.1 trillion in February.