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We examine how the cost of corporate credit varies around fiscal consolidations aimed at reducing government debt. Using a new dataset on fiscal consolidations and syndicated corporate loan data, we find that loan spreads increase with fiscal consolidations, especially for small firms, domestic firms, and for firms with limited alternative financing sources. These adverse effects are mitigated substantially if consolidations are large, and can be avoided if consolidations are also accompanied with more adaptable macroeconomic policies and implemented by a stable government. These findings suggest that lenders price the short-term recessionary effects in loans but large consolidations can reduce or undo the increase in spreads, especially under favorable country conditions, by signaling credibility and creating expansionary expectations.

Debts, External. --- Debts, External --- Syndicated loans. --- Participating loans --- Loans --- Debts, Foreign --- Debts, International --- External debts --- Foreign debts --- International debts --- Debt --- International finance --- Investments, Foreign --- Syndicated loans --- E-books --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Industries: Financial Services --- Fiscal Policy --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Fiscal Policies and Behavior of Economic Agents: Firm --- National Budget, Deficit, and Debt: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Debt Management --- Sovereign Debt --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Finance --- Public finance & taxation --- Monetary economics --- Fiscal consolidation --- Public debt --- Credit --- Fiscal policy --- Financial institutions --- Money --- Debts, Public --- Italy

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This paper explores the determinants of Japanese banks’ overseas expansion and assesses whether the growing cross-border activity will continue under the new macroeconomic policies referred as “Abenomics”. The analysis finds that Japanese banks are well positioned to scale up foreign exposures, thanks to their relative resilient balance sheets and continued growth in the region. Stronger domestic growth in Japan could mitigate the pace, but is unlikely to reverse the expansion as global and regional pull-factors play a more prominent role in the growth of cross-border claims. Increasing cross-border activity could pose funding risks and supervisory challenges and require continued close monitoring.

Banks and banking --- Finance --- Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Industries: Financial Services --- Financial Crises --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Banking --- Monetary economics --- Economic & financial crises & disasters --- Foreign currency exposure --- Global financial crisis of 2008-2009 --- Project loans --- Loans --- Money --- Financial crises --- Financial institutions --- Syndicated loans --- Foreign exchange market --- Global Financial Crisis, 2008-2009 --- Japan