TOKYO, Feb. 16, 2019—As The Prospect warned earlier, Japanese regional banks are suffering badly – and more seriously than analysts, industry officials and the central bank governor had anticipated under the prolonged zero interest rate policy and quantitative easing: Seventy-nine regional banks listed on the Tokyo Stock Exchange have reported earnings decreased 16.0 percent during the nine months ended in December to 693.8 billion yen ($6.5 billion) year-on-year, and of them all, 65 banks, or more than 80 percent of them, incurred decreases or deficits.
The 79 banks forecast earnings to decrease 9.5 percent for the fiscal year, which ends in March 2019, to 876.8 billion yen, and bank officials commented they are powerless to ride out the dismal condition unless Japan’s interest rates return to the healthy, historical path (of 2-1/2 to 3 percent short-term rates).
There were a few banks that reported earnings increases. They focused their business on local lending, instead of purchasing foreign bonds and exotic instructs that bear ‘real interest rates’ instead of Japanese government bonds that offer close to zero.
Prolonged zero rate conditions are forcing regional banks to urge early retirement and bouts of cost cuts but the latest results showed that those endeavors fell short, the condition that should start showing up in large Japanese banks’ earnings more visibly from 2019.
Toshio Aritake