Declining Earnings Power of Regional Financial Institutions Due to Population Decline and Interest-Rate Competition

「In financial markets, the Bank of Japan maintained its policy rate during the period. Accordingly, the unsecured overnight call rate remained just below 0.5%. Meanwhile, in April, when the United States repeatedly raised tariffs, the 10-year government bond yield temporarily fell sharply as risk aversion intensified in financial markets. Thereafter, upward pressure on long-term interest rates emerged against a backdrop of easing uncertainty over U.S. tariff policy, growing expectations of rate hikes by the Bank of Japan, and concerns about deteriorating public finances due to government fiscal stimulus, and the 10-year government bond yield rose to above 1.6%.」

「The unsecured overnight call rate, which was in the 0% to 0.1% range at the beginning of the fiscal year, rose to approximately 0.5% by the end of the fiscal year. Long-term interest rates also remained on an upward trend, at times approaching 1.6% in late March 2025.」

「In financial markets, the unsecured overnight call rate remained in the 0% to 0.1% range during the first half of the period, then moved to just below 0.25% from the end of July after the Bank of Japan raised its target. Meanwhile, amid expectations of continued rate hikes by the Bank of Japan, the 10-year government bond yield temporarily exceeded 1%. However, following global financial market turmoil in early August, expectations of U.S. rate cuts increased, while the view that the Bank of Japan would raise rates only gradually gained strength, causing the 10-year government bond yield to decline to the 0.8% range.」

「In financial markets, short-term interest rates remained at extremely low levels while the Bank of Japan maintained large-scale monetary easing. Meanwhile, as the Bank of Japan made its yield curve control operations more flexible in July and October 2023, Japan's 10-year government bond yield temporarily rose to the high 0.9% range in November, reflecting factors including higher U.S. long-term interest rates. Toward year-end, however, the 10-year government bond yield declined to approximately 0.6% against a backdrop of lower U.S. long-term interest rates and other factors.」

「In financial markets, the Bank of Japan maintained its framework of large-scale monetary easing. Short-term interest rates remained at extremely low levels as the negative-interest-rate policy continued. Meanwhile, in July, the Bank of Japan decided to make its yield curve control operations more flexible, effectively raising the ceiling to +1.0%. As a result, together with continued rate hikes in Europe and the United States, Japan's 10-year government bond yield rose to the high 0.7% range at the end of September.」

「In financial markets, the Bank of Japan's continuation of the existing framework of quantitative and qualitative monetary easing with yield curve control kept short-term interest rates in negative territory. Long-term interest rates also remained just below the upper limit of +0.5%, reflecting factors including the Bank of Japan's maintenance of a permitted fluctuation range of approximately ±0.5%.」

「Because the Bank of Japan widened its permitted fluctuation range to approximately ±0.5% in late December, long-term interest rates rose to approximately 0.5%. However, in March, as concerns about the financial systems in the United States and Europe intensified, funds flowed into government bonds, regarded as safe-haven assets, in major countries, and Japan's long-term interest rates temporarily declined to approximately 0.25% toward the end of the fiscal year.」

「Following the Bank of Japan's decision in late December to widen the fluctuation range for long-term interest rates from approximately ±0.25% to approximately ±0.5%, long-term interest rates rose further toward year-end.」

「Meanwhile, long-term interest rates in Japan came under increasing upward pressure following a sharp rise in long-term interest rates in Europe and the United States, and continued to hover near the upper end of the Bank of Japan's tolerance range, approximately 0.25%.」

「In financial markets, the Bank of Japan continued quantitative and qualitative monetary easing with yield curve control, and short-term interest rates remained in negative territory. Meanwhile, long-term interest rates remained relatively high in recent years as central banks in the United States and elsewhere raised policy rates in response to rising prices. In June, long-term interest rates temporarily exceeded the upper end of the Bank of Japan's fluctuation range of approximately ±0.25%.」

「If additional monetary easing is implemented due to an economic downturn or other factors, loan interest rates may decline more than deposit interest rates, reducing income from deposits and loans and potentially having a material impact on the operations, performance, and financial position of the Group.」

「In financial markets, the Bank of Japan maintained accommodative monetary policy by continuing quantitative and qualitative monetary easing with yield curve control and the Special Program to Support Financing for the Novel Coronavirus. As a result, short-term interest rates remained in negative territory, while long-term interest rates remained slightly above 0%.」

「In financial markets, the Bank of Japan maintained accommodative monetary policy by continuing quantitative and qualitative monetary easing with yield curve control and extending the term of the Special Program to Support Financing for the Novel Coronavirus. As a result, short-term interest rates remained in negative territory, while long-term interest rates remained slightly above 0%.」

「In financial markets, the Bank of Japan continued quantitative and qualitative monetary easing with yield curve control and maintained various monetary easing measures, including the Special Program to Support Financing for the Novel Coronavirus. As a result, short-term interest rates remained in negative territory, while long-term interest rates continued to hover generally around 0%. Consolidated gross profit decreased by ¥5,976 million from the first nine months of the previous fiscal year to ¥157,275 million, due mainly to a decline in market-related gains and losses.」

「Consolidated gross profit decreased by ¥5,260 million from the first six months of the previous fiscal year to ¥105,264 million, due mainly to declines in gains on fees and commissions and market-related gains and losses.」

「Consolidated gross profit decreased by ¥712 million from the previous consolidated fiscal year to ¥215,878 million, due mainly to a decline in net interest income resulting from the effects of the prolonged negative-interest-rate policy.」

「Consolidated gross profit decreased by ¥990 million from the first nine months of the previous fiscal year to ¥163,251 million, mainly due to a decline in domestic interest income on deposits and loans.」

「In financial markets, the Bank of Japan's continuation of quantitative and qualitative monetary easing with yield curve control kept short-term interest rates in negative territory. Long-term interest rates gradually moved further into negative territory, reflecting factors including lower U.S. long-term interest rates amid growing expectations of rate cuts by the Federal Reserve Board (FRB).」

「Consolidated gross profit decreased by ¥18,477 million from the previous consolidated fiscal year to ¥216,590 million, due mainly to declines in net interest income and gains on fees and commissions resulting from the effects of the prolonged negative-interest-rate policy.」

「In financial markets, the Bank of Japan's continuation of quantitative and qualitative monetary easing with yield curve control kept short-term interest rates in negative territory. After the Bank of Japan decided in July 2018 to strengthen the framework for sustained powerful monetary easing, including by widening the range of long-term interest-rate movements, long-term interest rates rose temporarily to the mid-0.1% range. However, as financial markets became unstable toward year-end, they fell again to around 0%.」

「In financial markets, the Bank of Japan's continuation of quantitative and qualitative monetary easing with yield curve control kept short-term interest rates in negative territory, while long-term interest rates also remained at extremely low levels.」

「Consolidated gross profit increased by ¥3,413 million from the previous consolidated fiscal year to ¥235,067 million. This was despite a decline in domestic interest income on deposits and loans accompanying the continuation of the negative-interest-rate policy, as revenue synergies from the management integration and an increase in gains on fees and commissions, particularly from corporate business, more than offset the decline.」

「Ordinary income increased by ¥64 million year on year to ¥243,965 million, as higher interest and dividend income on securities more than offset declines in interest income on loans resulting from the prolonged low-interest-rate environment and in other operating income.」

「Ordinary income decreased by ¥7,890 million year on year to ¥158,445 million, due mainly to lower interest income on loans resulting from the prolonged low-interest-rate environment and a decline in other operating income.」

「In recent years, the market size of regional economies is expected to contract going forward due to factors including population aging and decline. At the same time, although the corporate sector has had excess funds and its reliance on indirect financing has declined since the collapse of the bubble economy, the number of regional financial institutions has not decreased, resulting in major structural changes in their operating foundations.」

「The market size of regional economies is expected to shrink in the future due to factors including population ageing and population decline. At the same time, since the collapse of the bubble economy, the corporate sector has become a net holder of funds and its dependence on indirect finance has declined, while the number of regional financial institutions has not decreased. This has caused major structural changes in the operating foundations of regional financial institutions. As a result, addressing narrowing net interest margins and declining profitability caused by interest-rate competition has become a key management issue for regional financial institutions as a whole.」