Japan’s major banking groups are expected to see further improvements in profitability as rising domestic interest rates boost lending margins, investment returns and other customer-related revenue streams, according to Fitch Ratings.
In a commentary published on November 2, 2026, the credit rating agency said continued monetary policy normalisation, combined with modest but positive real GDP growth, would support stronger and more sustainable earnings across the country’s megabanks.
Profitability is also expected to benefit from stable credit costs, while banks continue to shift towards higher-return, asset-light and fee-based business models.
Fitch expects asset quality to remain broadly stable, with impaired loan ratios projected to range between 1% and 1.2% over the next two years. However, weaker global economic growth and expansion into less stable overseas markets could create additional pressure on credit quality.
The agency noted that strong lending standards and disciplined risk management would help contain potential deterioration as borrowing costs increase and debt-servicing pressures intensify.
Funding and liquidity positions are also expected to remain robust, supported by the megabanks’ large and stable domestic yen deposit bases. Nevertheless, competition for low-cost deposits is likely to increase. A shift in household savings towards investment products could also limit deposit growth.
Fitch added that capital adequacy ratios should remain at satisfactory levels, supported by stronger internal capital generation.
In a September commentary, the agency highlighted that positive interest rates in Japan would help banks generate more sustainable earnings from their domestic banking operations.
Meanwhile, Japan’s three largest banking groups—MUFG, SMBC and Mizuho Bank—have recently announced plans to enable commercial transactions using stablecoins by March 2027.
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