Japanese Banks Mizuho and Sumitomo Mitsui Report Higher Than Expected Profits

Mizuho Financial Group raised its annual profit forecast to ¥1.02 trillion, up from ¥940 billion, and Sumitomo Mitsui Financial Group exceeded expectations with a first-quarter profit of about 29% of its full-year goal. The banks' underlying businesses showed growth, with higher net interest income, benefiting from the Bank of Japan's exit from massive monetary easing. Shares of banks rose sharply after the US announced a tariff deal with Japan.

Tokyo-based Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. have both raised their profit forecasts, reflecting a positive outlook for the Japanese banking sector. Mizuho expects net income to reach a record ¥1.02 trillion ($6.9 billion) for the fiscal year ending March 31, up from its earlier projection of ¥940 billion [1]. Sumitomo Mitsui’s first-quarter profit reached about 29% of its full-year goal, which it left unchanged at ¥1.3 trillion [1].

The improved financial performance is attributed to higher interest rates and a clearer economic outlook. Japan’s three biggest banks predicted another year of record profits in May, even as the nation’s export-driven economy faced risks from US tariff threats. The recent trade deal between the US and Japan has been seen as a positive development, benefiting Japanese banks from higher rates and a resurgent stock market [1].

Mizuho’s net income rose 0.4% from a year earlier in the three months ended June 30 to ¥290.5 billion, while Sumitomo Mitsui’s profit increased 1.5% to ¥376.9 billion, both exceeding analysts’ estimates [1]. The underlying businesses showed growth, with both banks posting an increase in net interest income, or profits from lending. This growth is partly due to the Bank of Japan’s exit from its massive monetary easing policy in March last year [1].

The Bank of Japan (BOJ) left its policy rate unchanged at 0.5% on Thursday but raised its price outlook, fueling expectations for an interest-rate increase [2][3]. The central bank raised its inflation projections and maintained its view that inflation will stay near its 2% target. It expects consumer inflation, excluding volatile fresh food prices, to reach 2.7% in the year ending March 2026, up from a previous forecast of 2.2% [2][3]. The trade deal with the US has cleared some uncertainties, making the environment more favorable for further monetary tightening [2][3].

Shares of banks rose sharply in a broader stock rally earlier this month after the US announced its tariff deal with Japan. Mizuho has gained about 16% this year, while Sumitomo Mitsui is up 2.4% [1]. The yen briefly strengthened to around 148.60 against the dollar from near 148.90 before the announcement, and the benchmark 10-year Japanese government bond yield inched up to 1.56% [2].

The BOJ also expects Japan's economy to grow 0.6% in the current fiscal year, up from a previously projected 0.5% expansion. It forecasts growth of 0.7% in the year ending March 2027 and 1.0% the following year [2]. Despite some domestic political instability following the ruling coalition's loss in the Upper House election, the BOJ is seen as unlikely to rush into further rate hikes but is more likely to consider additional rate hikes due to the improving economic outlook [2][3].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-31/mizuho-raises-profit-forecast-as-japan-megabanks-beat-estimates
[2] https://www.morningstar.com/news/dow-jones/202507311657/bank-of-japan-raises-price-forecasts-fueling-rate-hike-hope-2nd-update
[3] https://www.marketwatch.com/story/bank-of-japan-stands-pat-but-raises-price-forecasts-update-2ea4f910