Japan’s major banks are finally getting a visible earnings lift from higher domestic loan yields, and the Financial Services Agency’s aggregate numbers suggest the credit hangover has not yet arrived in force. For the year to March 2026, attributable net profit rose 32.7% from a year earlier to 59,742 on the FSA’s ¥100mn reporting scale. The agency says the main drivers were bigger domestic loan balances, higher yields on those loans, and stronger fee income from asset management and lending-related business.
More than a one-line yield story
The mix matters. Net interest income rose to 78,803 from 68,418, fee income increased to 58,300 from 50,437, and gross business profit reached 163,694 from 137,944. Other business profit recovered to 7,248 after a loss of 4,574 a year earlier. Bond-related gains and losses were still negative at -5,331, but that was an improvement from -12,581. Expenses climbed to -95,978 and credit-related costs worsened to -9,621 from -5,975, yet net operating profit still advanced to 69,879. Even on the cleaner measure of core net operating profit excluding mutual-fund cancellation gains and losses, the number rose to 48,377 from 40,448.
That combination is useful for anyone trying to judge the shift to higher domestic yields from bank earnings alone. The uplift was not a one-off trading windfall or a simple cost-cutting story. In the FSA’s presentation, lending income and fee income both did real work, while some older annoyances, especially bond-related losses, became less severe rather than disappearing.
| Metric | Year to March 2024 | Year to March 2025 | Year to March 2026 |
|---|---|---|---|
| Net interest income (¥100mn) | 57,256 | 68,418 | 78,803 |
| Fee income (¥100mn) | 46,098 | 50,437 | 58,300 |
| Other business profit (¥100mn) | 9,378 | -4,574 | 7,248 |
| Bond-related gains/losses (¥100mn) | -5,602 | -12,581 | -5,331 |
| Credit-related costs (¥100mn) | -10,106 | -5,975 | -9,621 |
| Attributable net profit (¥100mn) | 33,788 | 45,023 | 59,742 |
| Domestic loans at period end (¥tn) | 371.5 | 380.6 | 408.1 |
| Non-performing loans (¥tn) | 3.9 | 2.9 | 3.0 |
| Non-performing-loan ratio | 0.93% | 0.67% | 0.64% |
Loan growth is visible, asset stress less so
The balance-sheet side points in the same direction, at least in aggregate. Domestic loans at period-end reached ¥408.1tn, up from ¥380.6tn a year earlier and ¥371.5tn two years earlier. Non-performing loans, measured on a bank standalone basis, edged up to ¥3.0tn from ¥2.9tn at end-March 2025. But the non-performing-loan ratio still fell, to 0.64% from 0.67%, and from 0.93% two years earlier.
That is not the same as declaring the cycle risk-free. Credit-related costs did worsen year on year, and the bad-loan balance itself was slightly higher. Still, the regulator’s aggregate snapshot does not yet show an obvious asset-quality break while lending expands and yields rise. For business readers, that is the central takeaway: the pleasant part of higher domestic rates is showing up clearly in earnings, while the ugly part remains hard to see in the headline bad-loan ratio.
Capital is the quieter caution flag
The caution flag in this release sits in capital rather than headline profits. The FSA says the total capital ratio, Tier 1 ratio and common equity Tier 1 ratio all declined at the four internationally active groups versus end-March 2025, while the capital ratio at the three domestic-standard groups was flat. The source text provided here does not include the exact percentages, so the careful reading is limited: profitability improved, but capital buffers did not uniformly rise with it.
There is one more wrinkle worth keeping in view. The FSA presents profit and capital on a group consolidated basis, while loan and non-performing-loan data are on a bank standalone basis. So this is best read as a direction-of-travel report, not a neat one-line equation. Even with that caveat, the direction looks clear enough. Japan’s major banks are earning more from domestic lending and related services. Bond portfolios are still a drag, just less of one. And the aggregate credit picture, for now, remains more reassuring than alarming.