The credit ratings of banks from Japan were slashed by Moody’s Investors Service due to anxiety over weak public finance that may lessen the capability of the government to provide assistance to lenders during times of crisis.
Bank units of Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc, and Mizuho Financial Group were just three of the many banks that were downgraded one step lower by Moody’s following the downgrade on the government’s credit rating today.
According to Moody’s, “The downgrades primarily reflect the combined impact of the change in the rating of the government of Japan - as a supporting entity - and Moody’s reduced assumptions for government support to the banking system in a stress scenario.”
Profitability scores of the financial institutions in Japan have ceased by 20 consecutive months due to less loans that were a result of a contracting economy that was hit by deflation and less demand for credit. In order to fill the lending void, financial institutions have been purchasing the country’s debt, having 154.3 trillion yen or $2 trillion in value of government securities this month of June which is near a record of 158.8 trillion yen during the month of April.
Financial shares have gone down due to the downgrade. Mitsubishi UFJ which is regarded as japan’s largest publicly traded bank was down by 2.9% to 332 yen in the afternoon trading in Tokyo. Sumitomo Mitsui has gone down by 1.8%. Mizuho was down by 0.9%. Topix stock index declined by 1.1%.
Tags: Mitsubishi UFJ Financial Group, sumitomo mitsui financial, Profitability scores, afternoon trading, government securities, public finance, sumitomo mitsui financial group
