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Japanese bank risk appetite rises late

3 minute read

Mitsubishi UFJ Financial Group, Inc. (MUFG) President and Group CEO Hironori Kamezawa speaks during an interview with Reuters in Tokyo, Japan July 9, 2020. Picture taken July 9, 2020. REUTERS/Issei Kato

HONG KONG, June 11 (Reuters Breakingviews) - If anyone knows how to deploy excess deposits, it should be Japanese banks, who have wrestled for decades with cash hoards and ultra-low rates. Mitsubishi UFJ Financial (8306.T) is now planning a $9 billion fund to invest in credit, stocks and other assets in its latest effort to bolster returns, Bloomberg reports. Collectively the Japanese system is sitting on almost $3 trillion in surplus funds, even with negative domestic benchmark interest rates.

MUFG has branched out before. In 2019 it bought a $6 billion-plus book of aviation loans from Germany’s DZ Bank, plus took control of Indonesia’s Bank Danamon for $3.5 billion. Unfortunately the latter deal prompted a $1.9 billion writedown almost immediately. The same year rival Mizuho Financial (8411.T) booked $1.6 billion in losses from its securities holdings, including foreign bonds. Now MUFG is preparing to invest at a time when many asset prices have been heated by stimulus. With higher returns come higher risks. (By Jennifer Hughes)

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