Shares of Mitsubishi UFJ Financial Group closed higher in Tokyo trading on Friday, rising 2.5% to finish at 2,951.5 yen after reaching a session high. The move represented a recovery from an intraday low of 2,803 yen.
Bank Signals Return to Government Bonds
MUFG has indicated it may increase its holdings of Japanese government bonds as long-term yields show signs of stabilization. Takayuki Hara, managing director and head of the bank's CFO office, stated the institution would "cautiously rebuild" its JGB position. This comes even as MUFG reported carrying 200 billion yen in unrealized losses on its bond portfolio at the end of 2025, a result of earlier yield surges.
Election and Central Bank in Focus
Investors are closely monitoring Japan's national election this Sunday, which could influence fiscal policy and bond markets. Prime Minister Sanae Takaichi's coalition is projected to secure roughly 300 seats in the 465-seat lower house. Her pledge to eliminate the 8% sales tax on food has raised concerns about a potential 5 trillion yen annual revenue shortfall.
Simultaneously, the Bank of Japan continues to signal a willingness to raise interest rates further to manage inflation. Board member Kazuyuki Masu recently emphasized the central bank's commitment to preventing inflation from sustainably exceeding its 2% target.
The confluence of political and monetary policy developments sets up a critical test for financial markets. Analysts note that a shift toward looser fiscal policy could drive yields higher, negatively impacting bank bond portfolios again. Conversely, more aggressive BOJ tightening could increase funding costs for lenders.
Trading resumes on Monday with the yen and bond yields under scrutiny as the election results are digested. MUFG's U.S.-listed ADR settled at $19.14, up 89 cents from its previous close, providing a reference point for offshore investors ahead of the Tokyo open.
