Lending pro-cyclicality and macroprudential policy: Evidence from Japanese LTV ratios

Abstract Using unique micro data compiled from the real estate registry in Japan, we examine more than 400,000 loan-to-value (LTV) business loan ratios to draw implications for caps on LTV as a macroprudential policy measure. We find that ratio exhibits counter-cyclicality, behavior would have severely impeded efficacy of simple cap had it been imposed. also borrowers obtaining high-LTV loans are risky but grew faster those with lower loans, which implies fixed might inhibit growing (albeit risky) firms borrowing.