All of Japan's three megabanks raised their full-year earnings targets, expecting to benefit from higher interest rates, a trade deal with the US and the yen's depreciation against the dollar.
Mitsubishi UFJ Financial Group Inc. said on Nov. 14 that it revised up its net income outlook for the fiscal year ending in March of 2026 to ¥2.1 trillion from its initial goal of ¥2.0 trillion after Japan's largest bank by assets reported a 2.8% year-over-year increase in net income to ¥1.292 trillion for the April-to-September period.
Sumitomo Mitsui Financial Group Inc. lifted its full-year earnings estimate to ¥1.5 trillion from its earlier projection of ¥1.3 trillion on the back of a 28.7% jump in fiscal first-half net income to ¥933.50 billion. Mizuho Financial Group Inc. raised its full-year earnings target to ¥1.13 trillion from its previous projection of ¥1.02 trillion as its net income for the first-half period climbed 21.8% to ￥689.9 billion.
"Higher rates are favorable to us and the yen's depreciation [against the dollar] is obviously good for us," SMFG CEO Toru Nakashima said during a press conference on Nov. 14. "Concerns about the effect from the US tariffs [against Japanese exports] on the Japanese economy has receded and demand for fundraising from companies are robust."
Higher rates
Executives of the three megabanks bet on Bank of Japan resuming rate hikes. They expect a 25 basis-point increase to 0.75% in a policy rate, possibly in December or January, before the end of the banks' current fiscal year on March 31, 2026. The Bank of Japan maintained its benchmark rate at 0.5% for the sixth consecutive meeting in October, after exiting its negative interest rate policy in 2024.
"The markets see a 50% possibility of a rate hike in December and 80% in January," MUFG CEO Hironori Kamezawa said at a separate press conference on the same day. "I'm expecting a terminal rate to be 1.0%."
MUFG and SMFG both expect a 25 basis-point increase in the policy rate to contribute an additional ¥100 billion in net interest income a year.
The yen's recent depreciation against the US dollar, driven partly by Japanese Prime Minister Sanae Takaichi's intention to embrace a loose fiscal policy, tilts the exchange rate in favor of the banks with much exposure to overseas markets as they convert the US dollars earned outside Japan into yen.
The three megabanks calculated their first-half net income based on a dollar exchange rate of ¥148.81 to ¥148.89, lower than the ¥142.73 to ¥142.82 used for reporting their six-month earnings a year earlier. They also set the exchange rate at ¥140-¥145 to the dollar for their revised full-year earnings estimates.
"If the yen stays at around ¥150 [against the dollar], that would be great," SMFG's Nakashima said.
The US announced a trade deal in July under which it would charge a baseline tariff of 15% on imports from Japan. That helped remove a key overhang over the Japanese economy, allowing the nation's central bank to bring back its focus on its monetary policy normalization process.
As of Nov. 13, US$ was equivalent to ¥154.34.
