tokyo<u+2014>profits at japan<u+2019>s top banks were hurt by negative interest rates and a stronger yen in the fiscal first half, highlighting challenges in the banking industry. japan<u+2019>s biggest lender, mitsubishi ufj financial group inc. or mufg, reported net income of <u+00a5>490.5 billion ($4.5 billion) for the april-september period, down 18% from a year earlier as the bank of japan <u+2019>s negative interest rates policy started squeezing bank profits. of that, <u+00a5>30.5 billion came from the bank<u+2019>s investment in morgan stanley, <u+00a5>31 billion from u.s. operations including union bank and <u+00a5>24 billion from bank of ayudhya in thailand. the stronger yen was also a downside factor because it decreased the yen value of dollars earned overseas. mufg, which gets about 40% of its profit from outside japan, said a stronger yen generated a negative impact of <u+00a5>65 billion. the bank of japan early this year started charging interest instead of paying it on certain deposits held by commercial banks. this negative-rate policy brought down interest rates across the board, squeezing banks<u+2019> margins because they have to reduce rates charged to corporate borrowers but have a hard time lowering rates on depositors<u+2019> accounts below zero. nobuyuki hirano, mufg<u+2019>s president, said at a news conference that ultralow interest rates also weighed on retail investors<u+2019> sentiment, leading to weak performance in sales of financial products. <u+201c>we<u+2019>ll likely continue to see negative interest rates as a downside factor in the second half,<u+201d> mr. hirano said. mizuho financial group inc. and sumitomo mitsui financial group inc. also saw slight drops in net income<u+2014>6.7% and 7.5%, respectively. mizuho<u+2019>s net income came to <u+00a5>358 billion for the april-september period, while smfg posted <u+00a5>359 billion in net income. top executives at the banks said they weren<u+2019>t sure yet how donald trump <u+2019>s presidential victory would affect their business. shares of japanese banks initially fell after mr. trump<u+2019>s win but then surged thanks to expectations for pro-growth policies and a lighter regulatory burden in the trump administration. mizuho<u+2019>s president, yasuhiro sato, said the surge in financial stocks might not last. <u+201c>if something goes in the wrong direction, the market could react negatively,<u+201d> he said. but he added that if loan demand increases in the new administration, that would be a big business opportunity for his bank. smfg<u+2019>s president, koichi miyata, said the recent market volatility may create opportunities for trading but he wasn<u+2019>t sure how the election would change lending. write to atsuko fukase at atsuko.fukase@wsj.com
japan<u+2019>s bank earnings hindered by negative rates, stronger yen - wsj
atsuko fukase