Japan Bank Sector: Rate hike not the only issue; positive abnormalities on the lending business front

Research evidence excerpt

Japan Bank Sector: Rate hike not the only issue; positive abnormalities on the lending business front

J P M O R G A N Asia Pacific Equity Research

16 June 2026

Japan Bank Sector

Rate hike not the only issue; positive abnormalities on

the lending business front

The Bank of Japan raised the policy interest rate from 0.75% to 1.00% on June 16. Japan Equity Research

The content of today’s decision was widely anticipated, including in the Nikkei and

Banks

other media. Our economics team’s report is here. Bank stocks were weak today

after climbing in advance of the decision. The TOPIX bank index had risen by 9% Takahiro Yano, CFA AC

in the past month (TOPIX up 3%) but fell 1.0% June 16 (TOPIX down 0.2%). We (81-3) 6736-8616

takahiro.yano@jpmorgan.com

note that the accelerated upswing in Japan’s loan balance may be the result of action

Kohichi Takano

by borrowers in anticipation of continued or increased inflation, not only thanks to (81-3) 6736 8621

some large deals linked to M&A. If this is correct, the current ramp-up in lending kohichi.takano@jpmorgan.com

is unlikely to abate immediately. The megabanks have lower loan-to-deposit ratios JPMorgan Securities Japan Co., Ltd.

than regional banks while they also have strengths in corporate fee business, so we

think they are more likely to link robust loan demand to earnings. Accordingly, we

continue to recommend the megabanks more strongly than the regional banks. Our

current core recommendations are Sumitomo Mitsui Financial Group (SMFG) and

Mizuho Financial Group, which have relatively high CET1 ratios among the

megabanks, and Japan Post Bank, which is well placed to capture earnings

opportunities from the rise in the 10-year JGB yield.

Noisy on the lending front: YoY growth in domestic lending was about 3–4% in