Japan Banks Hit Hard By Slow Economy And Negative Rates – Shorting Mitsubishi UFJ Suggested

Mitsubishi UFJ Financial Group (MUFG), Japan’s biggest lender, is the latest name joining the club of banks whose profit has been hurt by the Bank of Japan’s negative interest rates and the hesitation of firms in ramping up new borrowing. MUFG on Monday reported first quarter profit dropped 32 percent from a year earlier to 188.9 billion yen ($1.84 billion), echoing weak earnings reports published last week by Japan’s second-biggest bank by assets, Mizuho Financial Group, and No.3-ranked Sumitomo Mitsui Financial Group which had witnessed 31% and 16% decline in profit, respectively.

Negative interest rates and speculation on BOJ moving rates deeper into negative territory later this year to fight deflation are putting considerable pressure on banks’ returns from loans but hardly boosting the already weak loan demand that is expected to become even more sluggish on slower economic growth. For the full fiscal year through March 2017, MUFG kept its net profit forecast unchanged at 850 billion yen, down 11 percent from the previous year.

Trade suggestion

Sell Stop at 5.17, Take profit at 5.10, Stop loss at 5.21

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