If anyone knows how to deploy excess deposits, it should be Japanese banks, who have wrestled for decades with cash hoards and ultra-low rates. Mitsubishi UFJ Financial (8306.T) is now planning a $9 billion fund to invest in credit, stocks and other assets in its latest effort to bolster returns, Bloomberg reports. Collectively the Japanese system is sitting on almost $3 trillion in surplus funds, even with negative domestic benchmark interest rates.
MUFG has branched out before. In 2019 it bought a $6 billion-plus book of aviation loans from Germany’s DZ Bank, plus took control of Indonesia’s Bank Danamon for $3.5 billion. Unfortunately the latter deal prompted a $1.9 billion writedown almost immediately. The same year rival Mizuho Financial (8411.T) booked $1.6 billion in losses from its securities holdings, including foreign bonds. Now MUFG is preparing to invest at a time when many asset prices have been heated by stimulus. With higher returns come higher risks. (By Jennifer Hughes)