Japan’s record ¥122.3 trillion budget passed on 7 April. Domestic media are busy picking ‘Takaichi stocks’ in defence and semiconductors. But the financial statements of the supposed beneficiaries tell a different story – and the budget’s largest single outflow goes not to growth investment but to debt service, enriching the banks and life insurers who underwrite it.
Japan’s FSA is quietly reversing 28 years of bank-industry separation. The market hasn’t noticed.
For three decades, betting on Japanese banks was an exercise in masochism. Negative rates crushed margins. Balance sheets swelled but profits did not. Then the Bank of Japan started hiking, and the masochists discovered they had been sitting on a convex payoff all along. The three megabanks are on course for record profits. MUFG has guided for 2.1 trillion yen, SMFG for 1.5 trillion, Mizuho for 1.13 trillion. The common explanation is that higher rates mean fatter margins. This is true as far as it goes, which is not very far. ...