Japan’s three largest banks make record annual profits

Japan’s three largest banking groups posted record annual net profit in the last financial year, benefitting from increased corporate activity due to the end of deflation in Japan.

The banks also expect to increase earnings this financial year - forecasting record profits once again - even though the economic outlook has been muddied by US President Donald Trump’s sweeping global tariffs.

Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group booked net profits of 1.86 trillion yen ($12.76 billion), 1.18 trillion yen and 885 billion yen, respectively, in the 12 months ended March 2025.

The banks said the impact of the tariffs and the resulting uncertainty was already being felt, and was accounted for in their forecasts.

Japan’s largest lender MUFG cited a global economic slowdown, continued market volatility and lost trust in the US dollar among risk factors, but nevertheless forecast a record net profit this financial year of 2 trillion yen.

SMFG projected net profit of 1.3 trillion yen and Mizuho 940 billion yen, including downward adjustments of 100 billion yen and 110 billion yen, respectively, to account for continued uncertainty.

Mizuho’s pipeline of equity capital markets and mergers and acquisitions deals is currently backed up as shifting business conditions make decision making on large-scale investment challenging, Chief Executive Masahiro Kihara told a press briefing in Tokyo.

But the banks expect Japanese companies to keep investing and each has extensive overseas operations across different financial services including retail and investment banking, asset management and wealth management.

“We have operations across Japan, Asia and the Americas with varied sources of profit, so we are strong in any business environment,” MUFG Chief Executive Hironori Kamezawa told a press briefing.

MUFG owns 24 per cent of US bank Morgan Stanley, a business alliance that began in 2008. The holding contributed more than a quarter of MUFG’s annual net profit.

Asia has also been a growth market for the banks. Most recently, SMFG announced last week its acquisition of a 20 per cent stake in Indian private lender Yes Bank.

But the tariff uncertainty means SMFG too is holding off on further acquisitions, CEO Toru Nakashima said on Wednesday.

Japan’s banks have been among the largest beneficiaries of the end of deflation in Japan, which has encouraged Japanese companies to borrow to invest at home and abroad and carry out mergers and acquisitions.

The return of inflation also pushed the Bank of Japan to end its policy of negative interest rates in March 2024 and hike rates twice thereafter, raising lending margins for Japanese banks.

PayPay CEO Ichiro Nakayama, SoftBank Corp CEO Junichi Miyakawa, Sumitomo Mitsui Financial Group CEO Toru Nakashima and Sumitomo Mitsui Card President Yukihiko Onishi pose attended a press conference in Tokyo, Japan, on Thursday.

Meanwhile talk of big fiscal spending and a subsequent spike in super-long yields are raising questions over just how quickly the Bank of Japan can taper its bond purchases, adding to the challenges it faces in removing remnants of its massive monetary stimulus.