Japan’s Top 3 Banking Groups Lift Profit Outlooks Amid BoJ Rate Hikes

Japan’s top three banking groups on Friday raised their net profit forecasts for the year ending March 2027 as the Bank of Japan’s interest rate hikes boosted lending margins.

Mitsubishi UFJ Financial Group Inc., the country’s largest lender by total assets, now expects its full-year net profit to reach 2.8 trillion yen ($17.5 billion), up 100 billion yen from its previous forecast.Sumitomo Mitsui Financial Group Inc. raised its net profit outlook by 200 billion yen from its previous estimate to 1.9 trillion yen, up 20 percent from the previous year.The bank said about half of the 200 billion yen increase, or 95 billion yen, was attributable to favorable market conditions, including higher interest rates.

Mizuho Financial Group Inc. also revised up its net profit projection by 200 billion yen to 1.6 trillion yen.In September, the BOJ raised its policy rate to around 1.25 percent, its highest level in 31 years, after increasing it to around 1.0 percentin June.

Although the central bank left the rate unchanged at its October meeting, it said underlying inflation had “generally” reached its 2 percent target after nearly 14 years of unconventional monetary easing. BOJ Gov. Kazuo Ueda also signaled room for further interest rate hikes to stabilize prices.Rising interest rates could dampen demand for loans by increasing borrowing costs.SMFG CEO Toru Nakashima said many business leaders recognize that they need to expand their businesses.“Companies’ appetite for capital investment remains strong, as does demand for bank financing,” he said.“We expect the effects of rising interest rates to gradually become more apparent over time, but at this point, we do not see them having a widespread or significant impact,” Nakashima said.MUFG President and CEO Junichi Hanzawa said the company “must take steps to drive its next phase of growth,” as interest rates are expected to remain high and gains from the sale of strategic shareholdings are likely to decline.

MUFG’s net profit rose 26.1 percent to 1.63 trillion yen in the April-September period, a record high for the first half of a fiscal year.SMFG reported a net profit of 1 trillion yen, up 7.5 percent from a year earlier, reaching the 1 trillion yen mark for the first time in theApril-September period.