Mizuho Bank Chairman Urges BOJ to Keep Easing While Peers UnwindBy
Hayashi says changing deflationary mindset is ‘quite tough’
Japan bank chiefs reportedly see risks in maintaining policy
Mizuho Financial Group Inc.’s banking unit chairman urged Bank of Japan Governor Haruhiko Kuroda to persist with his monetary easing even as central banks in the U.S. and Europe make moves toward tightening policy.
“They need to keep going to help us exit from the deflationary mindset,” Nobuhide Hayashi of Mizuho Bank Ltd. said in an interview in Washington, where he attended the Institute of International Finance’s annual meeting last week. “That mindset is quite tough to change. So Kuroda has to keep this monetary policy even as U.S. and Europe start unwinding theirs."
Hayashi, 60, signaled his comfort with the BOJ’s policy even after the heads of Japan’s biggest banks -- including Mizuho Chief Executive Officer Yasuhiro Sato -- reportedly raised their concerns earlier this month about persisting with it for a long time. Kuroda’s stimulus has boosted the Japanese economy while squeezing banks’ loan profitability and failing to achieve a targeted 2 percent inflation.
Kuroda, speaking in Washington over the weekend, pledged to continue monetary easing to reach his inflation goal. Federal Reserve Chair Janet Yellen said that the U.S. central bank expects to continue to raise interest rates gradually, while European Central Bank President Mario Draghi said he’s confident that inflation will pick up over time.
Hayashi acknowledged that the central bank’s success in bringing long-term rates down with quantitative easing has hurt his bank’s profitability. A flat yield curve lowers what banks can charge for loans, and Japanese lenders have among the lowest net interest margins at around 1 percent, according to data compiled by Bloomberg. Mizuho’s have lingered around 0.6 percent in recent quarters, the data show.
Mizuho is combating the decline in margins by diversifying from lending into areas such as fee businesses, said Hayashi, who was CEO of Mizuho Bank before becoming chairman in April. The Tokyo-based bank is seeking to increase non-interest income to 60 percent of the total in the year ending March 2019 from around 54 percent last fiscal year, according to its midterm business plan.
“We try to create a business model not relying on lending margins,” Hayashi said, adding that the bank is also seeking to focus more on global wholesale and corporate banking by emphasizing its strengths in Asia. “We can find our niche in that space,” he said.
— With assistance by Gareth Allan