Bank of Japan Rate Decision Rocks Japanese Financial Sector Stocks

The Bank of Japan's decision to hold its policy rate at 1% has set off ripples in Japan's financial sector. The yen has moved sharply, and 10-year government bond yields are near 2.8%. This development is likely to impact large banks and insurers in different ways.

Mitsubishi UFJ Financial Group (TSE:8306) is a global banking group with operations across Japan, the US, Europe, Asia, and other regions. It generates most of its revenue from customer-focused banking and investment services. The bank is working to reweight away from lower-return assets and reduce equity holdings while managing interest rate and foreign bond exposure.

Sumitomo Mitsui Financial Group (TSE:8316) is another large Tokyo-headquartered banking group that provides corporate and retail banking, securities, leasing, consumer finance, and cash management services. It generates most of its revenue from the Retail Business Unit at ¥1.56t and has a strong recent earnings momentum with a 26% net profit margin.

Rakuten Bank (TSE:5838) is an internet bank that offers deposit accounts, foreign currency and yen savings, investment trusts, and securities alongside loans and insurance products for individuals, sole proprietors, and corporate customers. It generates about ¥195.1b in revenue from its Banking segment and has shown strong earnings growth.