Mizuho CEO Sees 2 More Years of BOJ Easing as Loan Woes Persist

(Bloomberg) -- The Bank of Japan will continue with its unprecedented monetary easing policy for a “couple more years” and it will remain tough for lenders to make money from doling out credit, according to the top executive at Mizuho Financial Group Inc.

“Just simple lending business is not so profitable, and this situation will last,” Chief Executive Officer Yasuhiro Sato said in an interview on Wednesday with Bloomberg Television’s Haslinda Amin in Davos, Switzerland. Banks will need to keep diversifying into areas such as advising, bond sales and trust-related business, he said.

The timing of any stimulus reduction depends on the political and economic situation in Japan as well as the actions of the Federal Reserve and European Central Bank, Sato said. Japan’s ruling party led by Prime Minister Shinzo Abe is due to hold a leadership ballot in September, and a sales tax increase planned for next year may also dissuade central bank officials from tightening, he said.

Bank of Japan Governor Haruhiko Kuroda quelled speculation on Tuesday that the BOJ might be preparing to normalize policy when he said that the central bank isn’t in a position to even consider exiting. The BOJ is still far from its 2 percent inflation target, and Sato said it will be difficult to achieve the goal.

Mizuho’s financial performance has trailed that of larger competitors Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. this fiscal year as the BOJ’s negative interest rate policy squeezes loan margins and saps profitability. Sato, who will step down in April after almost seven years at the helm, has pledged to tackle swelling costs by cutting about a quarter of the group’s workforce over the next decade.

Tatsufumi Sakai, head of the group’s securities arm, will take the CEO post on April 1, and Sato will become chairman, the company said this month.

To contact the reporters on this story: Gareth Allan in Tokyo at gallan11@bloomberg.net, Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Colin Keatinge

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