Mitsubishi UFJ suggests raising interest rates as soon as possible.

MUFG President Unusually Supports Rate Hike Within This Year

In a rare public statement on monetary policy, MUFG President Hironori Kamezawa expressed that the Bank of Japan should more proactively address the ongoing inflationary pressures. He noted that although the company initially predicted a rate hike around March 2025, current price trends suggest the process could start this autumn.

Inflation and Wage Growth as Dual Drivers for Rate Hike

Kamezawa pointed out that Japan's inflation is not driven by temporary factors. Sustained wage growth and labor shortages provide a structural basis for price increases. He stated, "In this environment, delaying central bank action could intensify market volatility." Statements from bank executives pushing for tighter policies are extremely rare in Japan's financial sector, reflecting genuine concerns over inflation.

Rate Hike Could Help Maintain High Bank Profits

In a context of marginal tightening of loose policies, Japan’s major banks have seen significant profit growth in recent years. MUFG's latest financial report shows strong performance in the first fiscal quarter, with a record annual profit target of 2 trillion yen. Kamezawa admitted that interest rate normalization is a key factor driving bank margin profits, thus a rate hike within the year would further strengthen the support for bank sector performance.

Tariff Pressure Pushes Toward Clearer Policy Decisions

Regarding the current macro environment, Kamezawa also mentioned that the 15% import tariff imposed by the United States on Japan exerted real pressure, but it also strengthened companies' ability to assess future conditions. He believes this external shock forces policymakers to more carefully evaluate the balance between monetary and fiscal policies.

Uncertainty Remains if Economic Data Deteriorates

Although Kamezawa expressed support for a rate hike within the year, he also acknowledged that economic data in the coming months will be decisive. If consumer or investment activities slow, the policy committee might choose to delay action. "The window for observing won’t be too long, but we do not rule out the possibility of postponing until next spring."

Changes in Government Bond Yields Prompt Caution

Discussing MUFG’s asset allocation strategy, Kamezawa revealed there is no rush to increase Japanese government bond holdings. While rising yields are beneficial to the banking sector, they also sound alarms over fiscal sustainability issues, suggesting the central bank may face a more complex policy environment in the future.

Diversification Strategy Supports MUFG's Growth Prospects

Beyond the interest margin benefits from monetary policy changes, MUFG has also achieved expansion in overseas markets and non-interest businesses in recent years. Kamezawa emphasized that the company's profit structure is no longer highly dependent on the domestic market, but time is needed to convince the market to view MUFG as a growth-oriented company.

Currently, MUFG's stock price has risen by over 11% this year, but it does not yet fully reflect its globalization and structural adjustment achievements. Kamezawa stated that the key to increasing market value lies in changing the market's bias against the growth potential of large banks.

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