▲ MUFG Headquarters
Mitsubishi UFJ Financial Group (MUFG) has climbed to the top spot in market capitalization on the Japanese stock market, bolstered by expectations of interest rate hikes by the Bank of Japan (BOJ).
This marks the first time in 40 years, since the era of the bubble economy, that a financial institution has held the number one position in market capitalization.
According to the Nihon Keizai Shimbun (Nikkei) and other reports, shares of Mitsubishi UFJ closed 2.31% higher on the Tokyo Stock Exchange today (July 13), pushing its market capitalization past 42 trillion yen, or approximately 388 trillion won.
With this, Mitsubishi UFJ has surpassed companies such as Toyota Motor and Kioxia to claim the top spot.
The influx of investment capital appears to be driven by expectations that the Bank of Japan's interest rate hikes will lead to higher lending rates, thereby expanding the bank's earnings.
While the Nikkei Stock Average closed at 67,242.73, down 1.92% from the previous trading day, Mitsubishi UFJ bucked the trend and showed a rising trajectory.
It is the first time in 40 years that a banking stock has taken the top spot in market capitalization since Sumitomo Bank (now Sumitomo Mitsui Financial Group) did so in 1986, during the bubble economy era.
The Nikkei reported that companies such as Toyota Motor and the telecommunications firm NTT had consistently held the number one spot in market capitalization during the intervening years.
The reason banking stocks had failed to reach the top spot is deeply connected to Japan's macroeconomic situation over that period.
Banks, which earn money through lending to businesses and other entities, are considered representative cyclical stocks that are heavily influenced by Japan's economic growth and interest rates.
Following the collapse of the bubble in the early 1990s, the Japanese banking sector faced a massive problem with non-performing loans, and many large banks had to receive public funds.
In the 2000s, large-scale restructuring and mergers took place, leading to the integration of The Bank of Tokyo-Mitsubishi, Sanwa Bank, and UFJ Holdings to form the current Mitsubishi UFJ.
However, even after that, the prolonged deflationary economy and low interest rates kept the banks' stock prices and performance in a slump.
In particular, when the Japanese economy was hit by a massive shock from the Great East Japan Earthquake in 2011, Mitsubishi UFJ's market capitalization fell to less than 5 trillion yen (46 trillion won) that same year.
Furthermore, the Nikkei reported that Mitsubishi UFJ's stock price remained weak as the Bank of Japan introduced a negative interest rate policy starting in 2016.
While banking stocks have reclaimed the number one spot in market capitalization for the first time in 40 years, the fact that the banks' profit structures have changed since that time is also drawing attention.
During the bubble economy, banks earned money during a period of explosive growth in domestic real estate loans. Currently, however, Mitsubishi UFJ is focused on global business, with overseas operations in the United States and Asia accounting for more than 50% of its operating profit.
(Photo: AP, Yonhap News)
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