By Leika Kihara
TOKYO (Reuters) – Major Japanese financial institutions have seen their profitability strengthen due to rising interest rates, the central bank said on Tuesday.
But some lenders faced challenges in estimating the impact of interest rate hikes on their profitability, the Bank of Japan said in an annual report on the country’s banking sector.
“Many financial institutions expected credit costs to remain more or less flat, though some recorded large credit losses related to financing for global business activities,” the report said.
Some financial institutions, especially regional ones, also suffered an increase in valuation losses due to inadequate frameworks to mitigate risk and losses, it said.
Last year, the BOJ exited its decade-long, super-loose monetary policy. In January, it raised its policy rate to 0.5% from 0.25% on the view Japan was on the cusp of stably achieving its 2% inflation target.
The central bank has signaled its readiness to raise interest rates further if the economy and prices move in line with forecasts.
(Reporting by Leika Kihara; Editing by Christian Schmollinger and Edwina Gibbs)
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