The Japanese Bankers Association warned on September 17 that rising government bond yields threaten to trigger writedowns and realized losses for the industry. While banks recently reported record earnings, the association noted that these gains could be eroded by the declining market value of their bond portfolios.
The 10-year Japanese government bond yield has risen to 3%, marking a three-decade high. This trend is driven by concerns over national debt and expectations that the Bank of Japan will raise its policy rate to approximately 1.25% by mid-September 2026.
Japan’s three major megabanks—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group—recorded a combined net income of ¥5,26 trillion for the fiscal year ending March 2026. This represents a 34% year-over-year increase.
JBA chairman Masahiko Kato stated that banks are currently hesitant to increase their holdings of Japanese government bonds until there is greater clarity regarding the peak of interest rates. Meanwhile, the Financial Services Agency is monitoring the situation.
