Japan Bank Shares Rise as 10-Year JGB Yield Hits Nearly One-Month High

By Megumi Fujikawa

TOKYO--Japanese bank stocks rose on Tuesday morning as the yield on 10-year Japanese government bonds reached a nearly one-month high.

The index measuring Japanese bank shares on the Tokyo Stock Exchange rose 2% in early trading. Among the banks leading the gains was Mitsubishi UFJ Financial Group, which was up 2.1%, and Sumitomo Mitsui Financial Group, which was 1.9% higher. Smaller regional banks were also broadly higher.

Rising interest rates have raised the prospect of improving profit margins for Japan's banking sector.

The yield on 10-year Japanese government bonds rose to 0.915% in Tuesday's session, touching the highest level in nearly a month amid adjustments ahead of the Ministry of Finance's auction of 10-year JGBs scheduled for later in the day.

Investors are keeping a close eye on the auction result after the ministry's August sale, which was held when markets were going through a period volatility, was met with weak demand.

Mitsubishi UFJ Morgan Stanley Securities strategist Takahiro Otsuka said he expects solid demand at Tuesday's auction.

"Investing in the 10-year [JGB] sector is an effective option for securing profits for the time being" due to uncertainties over political conditions in both the U.S. and Japan, Otsuka said, as well concerns over the U.S. economic outlook.

JGBs are widely seen as safe assets to hold during times of uncertainty. The U.S. presidential elections are due in November, while Japan's ruling political party is set to hold a leadership election later this month.

Still, Otsuka said the 10-year yield could rise further in the long run because the Bank of Japan is likely to continue raising short-term interest rates. The BOJ could raise its rate target to around 1% in the final quarter of 2025 or later, he said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 02, 2024 22:12 ET (02:12 GMT)

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