It is one of the myths of post-bubble economies that conditions are made worse by banks' unwillingness to lend. In some cases this is true: the impulse for many lenders, particularly in the immediate aftermath, is not to build assets but to repair capital ratios. The bigger, more pervasive problem is on the demand side. Leverage becomes associated with hubris and ruin, rather than a short-cut to growth.

For evidence, see Japan. After two decades of paying down debt, about half of its listed companies are now virtually debt-free. Only rarely has exuberance broken out: since 1992 the average monthly fall in the outstanding loan stock has been 1.3 per cent, year-on-year. Now, in spite of very low long-term rates and extraordinary efforts from the Bank of Japan to stimulate lending, the appetite for credit is still just not there. In the BoJ's latest survey of loan officers, released yesterday, no financial institution among the 50 canvassed said corporate demand had risen in the past three months. The index has been negative – indicating weaker demand – for five consecutive quarters.

The result is that Japan Inc is fraying around the edges. According to figures from the Ministry of Finance, aggregate capital spending among big companies has been exceeded by depreciation charges since the first quarter of last year; by March 2010, the gap was Y1,500bn. In other words, Japan's total stock of productive equipment is declining in value. This is one legacy of the bust: the risk of splurging on an under-used plant is seen as greater than the risk of being blindsided by recovery. Yes, Japan has a peculiar set of demographics that exacerbate corporates' disinclination to borrow, and a persistent deflation problem that increases the real value of debt. But the lesson for other countries seems clear nonetheless. A central bank can expand its own balance sheet at will, but that does not mean the cash will get distributed. Money multipliers, as the BoJ has learnt, can stay broken for a long time.