Rakuten Bank Ltd. expects the Bank of Japan to raise interest rates again later this year, a move that could boost the Japanese online finance company\’s profits.
Hiroyuki Nagai, chief executive of the Bank of Japan, said in an interview that given the decline in the yen against the dollar, the Bank of Japan may take action again as late as October. It had previously canceled its negative interest rate policy in March.
Nagai said: Now that the Bank of Japan has abandoned its negative interest rate policy, as interest rates rise, the income and profits of financial institutions will increase significantly.
We have already started to benefit. We believe that if the Bank of Japan continues to raise interest rates, we will benefit even more than we do now.
That could boost results for Rakuten Bank parent Rakuten Group Inc., which has increasingly relied on revenue from its banking unit to offset losses from its foray into mobile phones.
The technology group has posted five consecutive years of losses as it attempts to transform its business.
And the stock price of its banking unit has doubled since its initial public offering in April 2023.
Nagai also added that given Japan\’s current economic conditions, he does not expect the Bank of Japan to raise interest rates significantly. But if the Bank of Japan raises interest rates by more than 25 basis points, this may have a negative impact. For example, some individuals and companies will not be able to repay their debts. Leading to an increase in default rates.
However, even if this happens, the CEO said he is confident that the bank can control the default rate because the bank\’s credit screening uses artificial intelligence in addition to traditional methods.
Rakuten Group holds about 49% of Rakuten Bank, one of the online retailer\’s core financial units.
The group also owns a brokerage, an insurance company and a credit card company. It is currently in talks with Rakuten Bank to reorganize its fintech subsidiary. This will give the group the opportunity to generate more cash.
They aim to complete the deal in October.
However, Nagai said such a deal must also make sense for Rakuten Bank\’s minority shareholders.
He said: If the interests of minority shareholders can be protected, we will strive to reach a restructuring agreement. Otherwise, we may reconsider.
Four more months at most? Rakuten Bank: The Bank of Japan may raise interest rates in October at the latest!
Rakuten Bank Ltd. expects the Bank of Japan to raise interest rates again later this year, a move that could boost the Japanese online finance company\’s profits.
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