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Japan’s Small Banks Load Up on Risk as They Fight to Survive

  • Regional banks bought BBB+ rated Samurai, negative-yield note
  • Lenders’ net income fell to the lowest since 2011, data show
Japan's Business District Ahead of BOJ's Tankan Report
Photographer: Toru Hanai/Bloomberg
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Japan’s troubled regional banks are plunging into riskier corners of the credit markets, in a struggle to survive ultra-low interest rates and an industry shakeout.

As debt yields tumble globally, the lenders are also facing weak business at home, where a shrinking population is hitting the outlying areas hardest. That’s prompting authorities to push for consolidation. Desperate to avoid that fate, the banks are shedding their traditional conservatism, fueling questions about their ability to manage riskier holdings including foreign assets.