Japanese lenders ‘do not blame central bank for problems’

Japanese lenders should not blame the Bank of Japan’s ultraloose monetary policy for their inability to boost trading revenue or for poor returns borne of lax risk management, the newly appointed head of the country’s banking lobby said.

Makoto Takashima said banks should instead be responsible for their own risk appetite and investment strategy, wading into a long-brewing debate about the effect of ultralow interest rates on commercial lenders.

Japanese banks have complained about the central bank’s ultra-loose policy, which they say has diminished returns from traditional lending and hurt their bottom line.

Banks, particularly smaller, regional lenders, have also been squeezed by the country’s declining population.

“I don’t think it’s quite right for banks to blame monetary policy for their changing risk appetite, or poor investment performance as a result of loosening their risk control,” Takashima said in an interview.

“Each bank should be responsible for their risk appetite to respond to their customer needs and boost revenue,” he said.

Takashima also heads the main unit of Sumitomo Mitsui Financial Group, Japan’s thirdlargest lender by assets.

He takes over as chair of the Japanese Bankers Association from Monday.

His comments appear to be something of a departure from those of his predecessor, Koji Fujiwara, who had urged the Bank of Japan to review its 2% inflation target and ultra-loose monetary policy, in what had been some of the strongest comments to date from the banking lobby.

Separately, Isao Kubota, the chair of Nishi-Nippon City Bank in southern Japan, recently said the central bank’s stimulus programme was hurting profits so badly that even mergers among regional banks could not be a solution.

Although Takashima said he agreed with much of his predecessor’s comments, he stressed that banks themselves were responsible to execute their businesses under the central bank’s monetary policy.

Still, the industry faces some headwinds: the ultra-loose monetary policy is expected to continue, while banks are under pressure to restructure their retail businesses as the population continues to shrink and as more customers change how they conduct financial transactions.

Mizuho Financial Group, Japan’s second-largest bank by assets, in February slashed its full-year profit outlook 86%, citing costs to close retail branches at home and restructuring of its securities portfolio of foreign bonds.

NEWLY APPOINTED CHAIR’S COMMENTS A DEPARTURE FROM PREDECESSOR’S CRITICISM OF ULTRALOW INTEREST RATES