Business Strategy and Outlook| Michael Makdad |
Mitsubishi UFJ Financial Group is Japan’s largest banking group, with an 8.5% share of domestic loans and 11.6% of deposits as of March 2021. In Japan, the environment for banks has been tough and we expect it to remain so. A long-running deflationary environment has led to low demand for loans, with the loan/deposit ratio having declined from 83% in 2000 to around 57% at present. The liabilities/net assets ratio for Japan’s approximately 1 million business corporations declined from a highly leveraged 4 times in the mid-1990s to a reasonably healthy 126% in 2019 as borrowers prioritized paying down existing debt rather than taking out new loans for investment, but we are concerned that credit costs may increase in the early 2020s after many corporations increased their borrowing in 2020 and as the aftermath of the pandemic affects some firms' business models.