TOKYO, Dec 31: The Bank of Japan (BOJ), fearing the return of a 1980s-style asset bubble, will start tightening its monitoring of banks’ real estate loans next year, the Nihon Keizai newspaper said on Saturday.

In a report that comes amid expectations for a shift in the BOJ’s ultra-easy monetary policy in 2006, Nihon Keizai said the central bank would step up checks of real estate loans through its inspection of financial institutions.

Types of loans to be monitored would include loans to real estate businesses, loans and investment in real estate investment trusts and funds, as well as non-recourse real estate loans, Nihon Keizai said.

If such loans are deemed to be excessive, the BOJ will demand that banks take action such as reducing the amount, it said.

New loans to the real estate industry by domestic banks rose to around 2.7 trillion yen ($22.92 billion) in the July-September quarter for a year-on-year rise of 44 per cent, the highest pace since a 74 per cent increase logged in the July-September quarter of 1987, the paper said.

Government data showed on Tuesday that Japanese consumer prices rose for the first time in two years in November, signalling an end to a seven-year bout of deflation that has undermined Japan’s economy, and reinforcing expectations of a shift in the central bank’s ultra-easy monetary policy next year—Reuters