Japanese Bank Shares Rebound as Negative Rate Fears Subside

  • Largest gains in three weeks at three biggest lenders
  • BOJ policy impact on bank profit less than initially thought

Mitsubishi UFJ Financial Group Inc. and its megabank peers rose the most in almost three weeks, as investor concerns over the impact of Japan’s new negative interest rate policy eased.

MUFG increased by as much 8.6 percent, Sumitomo Mitsui Financial Group Inc. was up 8.3 percent and Mizuho Financial Group Inc. rose as high as 7.3 percent, their biggest intraday gains since February 15. The smaller Shinsei Bank Ltd. was the top mover among Japanese banks, up by as much as 9.3 percent, the most since June 2013.

The banks outperformed the benchmark Topix index, which was up 1 percent in late-morning trade in Tokyo.

“Banks were sold off too heavily on concerns negative rates will hurt earnings but the thinking now is that it won’t be as bad as initially thought,” said Masahiro Ichikawa, a Tokyo-based senior strategist at Sumitomo Mitsui Asset Management Co. “Also, high dividend stocks are being favored because of the negative rates in bonds.”

Japan’s bank shares dropped after the Bank of Japan’s surprise announcement of a negative interest rate policy on Jan. 29. In addition to a charge of 0.1 percent on some deposits at the central bank, lenders also face indirect effects as lower interest rates further squeeze loan margins and returns on government bond investments fall.

BOJ Governor Haruhiko Kuroda tried to pare the impact on lenders by introducing a three-tiered system under which only a portion of deposits at the central bank would be penalized. Analyst Takashi Miura at Credit Suisse Group AG in Tokyo wrote in a Feb. 26 report that while negative interest rates will have less of a negative impact than previously thought, he still expects them to depress net interest income at essentially all banks.

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