MNI: BOJ Nakaso Urges Banks To Raise Profits, Tackle Problems

     TOKYO (MNI) - Bank of Japan Deputy Governor Hiroshi Nakaso on Wednesday

urged private banks, especially regional banks, to make serious efforts to

improve their low profitability and tackle their structural problems. 

     Nakaso, in a speech to business leaders here, said that the nation's

financial system is stable at the moment but added the BOJ must pay close

attention to the potential system vulnerabilities.

     "Japan's financial system remains stable, but I think that attention should

be paid to potential vulnerabilities. That is what I will talk about today; more

specifically, the problem of financial institutions' low profitability and

intensified competition, with a main focus on regional financial institutions,"

Nakaso said.

     The BOJ's aggregate financial cycle indicator, which is derived from major

financial activity indexes, "has shown no significant imbalances recently,"

Nakaso noted. 

     However, Nakaso was quick to add a note of caution. 

     "There is no guarantee that the financial system can continue to maintain

stability in the future. The stock market seems to be sending us a critical

signal on this point."

     Nakaso renewed the BOJ's warning to private banks, especially regional

banks, that they must work harder to improve their weak profitability in a

continued environment of super-low interest rates.

     Nakaso's warning follows the BOJ's twice-annual Financial System Report

released last month, in which the BOJ said that more than four years of monetary

easing has not caused any overheating in the economy or the financial system but

that the profitability of lenders remains low because there are too many of

them.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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