Japan’s Megabanks to Remain Buoyed by BOJ’s Long Game to Hike Rates

(Bloomberg) -- Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. will detail how much the Bank of Japan’s commitment to raise borrowing costs could help profit margins in the midst of uncertainty sparked by US tariffs.

Japan’s central bank stood pat earlier this month after a cycle of rate hikes since March 2024 and halving its economic growth outlook to 0.5% for this fiscal year. While the BOJ pushed back the timeline for reaching its 2% inflation target citing increased uncertainty from the trade war, Governor Kazuo Ueda emphasized that the adjustment doesn’t necessarily imply a delay in future rate hikes. 

MUFG earlier raised its guidance for the fiscal year ended in March. MUFG and Mizuho had already achieved 100% of their guidance by the end of the third quarter, while SMFG stood at 98%, Morningstar analyst Michael Makdad said. All three lenders are projected to beat guidance unless they report net losses for the fourth quarter. he added. They are slated to post strong growth in net fee and interest income.

“Expect all three megabanks to exceed their guidance for the just-ended year, but I think the market’s focus is completely on the forward outlook and not results,” Makdad added. Anticipation for Japanese lenders’ shareholder returns, including share buybacks, have likely shifted lower amid the trade war, SMBC Nikko said. 

The outlook for China’s tech sector should be muted amid the intensifying geopolitical and economic tensions, as analysts continued to hold back on raising profit estimates despite DeepSeek’s popularity, said Bloomberg Intelligence.

The country’s internet sector is at rising risk from a possible secondary impact of US tariffs, given their potential to hurt the broader Chinese economy and slow down consumer spending, BI added. Alibaba Group Holding Ltd., Tencent Holdings Ltd., and JD.com Inc. are due to report.

Highlights to lookout for:

Monday: Shiseido’s (4911 JP) sales gains may be capped by a slower-than-expected recovery of demand from tourists across Asia ex-Japan and weaker China consumer sentiment, BI said. The company may launch new products and marketing campaigns in China spur demand, it added. 

Tuesday: SoftBank Group (9984 JP) will probably post its first full-year profit since 2021, supported by a jump in investment income, consensus shows.

• Nissan (7201 JP) and Honda (7267 JP) likely saw weaker fourth-quarter sales in the US, the biggest market for both. Analysts at Citi said auto companies’ short- to long-term response to tariffs could be more important than actual earnings figures, and forward guidance may be weaker than expected. The companies also called off merger talks in February, leaving Nissan to seek other avenues to fix its weak financial position.
• JD.com’s (JD US) decision to aggressively expand into the food delivery sector, encroaching on Meituan’s market position, will be scrutinized. Analysts from Citi said the move could be timely as the firm had extra cash to reinvest in growth drivers from China’s appliance trade-in program.

Wednesday: Sony’s (6758 JP) full-year operating income should have grown 14%, the fastest pace in three years, helped by gaming business outperformance. BI estimates US tariffs will raise the price of the PlayStation 5 by 30%. It also expects the company to guide toward an operating profit drop in the 2026 financial year, or decline to provide an outlook amid tariff uncertainty.

• Tencent (700 HK) should continue to see profit growth driven by video games rather than artificial intelligence this year, BI said. First-quarter revenue likely grew 10%, buoyed by its domestic game segment. The tech giant may be exposed to more US sanctions, and the growth outlook for the second half for its fintech, advertising and video game units is increasingly vulnerable, BI added.
• SMFG’s (8316 JP) net interest income likely rose 20%, consensus shows.
• Hon Hai’s (2317 TT) first-quarter net income may have risen 68%, supported by a higher revenue contribution from its cloud and networking products business, estimates show. Sales in April surged 26%, likely boosted by the hastening of orders ahead of US tariffs that could upend business for its customers.

Thursday: Alibaba (BABA US) could see stronger cloud revenue through fiscal 2026 as new AI products, including its collaboration with Apple Inc., gains more traction, BI said. Fourth-quarter revenue likely rose 7.2%, with the cloud intelligence segment up 17%, estimates show. 

• Singapore Airlines’ (SIA SP) full-year net income is expected to be pressured by overall higher expenditure, consensus estimates show. The airline, which has one of the highest hedging positions among Asia Pacific carriers, may benefit less from falling oil prices, BI said.
• MUFG (8306 JP) earlier said in a preliminary filing that full-year net income rose 29%. Mizuho’s (8411 JP) fourth-quarter net income likely rose about 164%, consensus shows.

Friday: No major earnings of note.

(Updates throughout.)

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