The Bank of Japan's shock negative rate policy is taking a bite out of profits at major banks, with Mitsubishi UFJ on Monday warning over its bottom line.
The huge lender said its net profit fell 8.0 percent to 951.4 billion yen ($8.7 billion) in the fiscal year to March, blaming the drop on a slowdown in the economy, sluggish equity markets, and low interest rates.
Rivals Sumitomo Mitsui Financial Group and Mizuho Financial Group said last week that negative rates were also squeezing their lending margins.
In January, Japan's central bank surprised markets with the negative rate policy, which was designed to boost lending to people and businesses, and stoke growth in the wider economy.
But the move -- which effectively charges commercial banks for keeping excess in Bank of Japan vaults, giving them an incentive to lend more -- was widely criticised as a desperate bid to prop up Tokyo's faltering economic growth blitz.
Bankers were among the policy's biggest critics including Mitsubishi UFJ's chief executive Nobuyuki Hirano, who warned it would hurt lenders' finances as they battle to drive up already sluggish lending.
"We expect to see an acceleration in the contraction of domestic interest margins associated with the BoJ's introduction of negative rates," said Akira Takai, a Tokyo-based analyst at Daiwa Securities Group.
Separately, Mitsubishi UFJ on Monday for the first time appointed two women to executive positions in its core banking unit.
The relatively unusual move -- Japan Inc's top ranks are overwhelmingly male -- comes as Prime Minister Shinzo Abe has called on firms to boost the role of women as part of his wider bid to kickstart the world's number three economy.
The BoJ's new policy has hurt lenders' share prices, making them the worst performers on the Tokyo Stock Exchange this year.
Their earnings have also been under pressure owing to a slowdown in Asian economies and while they've had to boost their allowances for bad debts.
Last week, Sumitomo Mitsui said its net profit dropped 14 percent to 646.7 billion yen for the past fiscal year.
Mizuho's net profit rose for the latest period, but it also warned that its profits would come under pressure this year.
Japan's banking system has undergone huge changes over the past two decades, including numerous mergers that have lead to a sharply reduced number of large institutions.
Years of ultra-low interest rates have pressured profitability and pushed them to seek expansion overseas.
-- Bloomberg News contributed to this report --