Japanese FSA Flags Concerns Re: USD Funding Of Japanese Bank Ops

A BBG piece notes that “Japanese banks’ success in taking on Wall Street to offer loans in the U.S. is drawing regulatory attention as the cost of USD funding rises.”

• Japanese banks have been looking to combat the impact of low interest rates and limited demand in domestic loan markets. Fed tightening is putting these banks at a disadvantage when compared to their U.S. counterparts, as the BoJ is maintaining its ultra-easy stance, creating USD funding headwinds.
• A deputy director-general at Japan’s FSA told BBG that “we need not only to watch the volume and costs of funding, but also to monitor and discuss their business model.”
• The same official noted that “I don’t know whether the non-investment grade sector will be hit this time or not. But it’s a fact that they are vulnerable, and we will monitor closely.” This comes at a time when the Japanese megabanks have expanded into such business lines as they look to lift profits.
• A reminder that this interview comes just ahead of the time that the 3-month JPY/USD x-ccy basis metric will start to capture year-end turn dynamics. The 6-month x-ccy basis metric moved at the end of June (when it captured year-end turn) and hasn’t got close a full retrace.

Source: MNI - Market News/Bloomberg