Rakuten Bank, an online financial company in Japan, expects that the Bank of Japan will raise interest rates again later this year after cancelling negative interest rate policy in March. This will boost the bank's profits.
Rakuten Bank, an online financial company in Japan, expects that the Bank of Japan will raise interest rates again later this year after cancelling negative interest rate policy in March. This will boost the bank's profits.
Hiroyuki Nagai, CEO of Rakuten Bank, said that the Bank of Japan may take action as late as October due to decline in the yen-dollar exchange rate. "Now that the Bank of Japan has cancelled its negative interest rate policy, financial institutions' revenue and profits will significantly increase with rising interest rates." "We have already started to benefit. We believe we will get more benefits if the Bank of Japan continues to raise interest rates."
This may boost the earnings of Rakuten Group, which is becoming increasingly reliant on its banking division's revenue to offset losses from its foray into the mobile phone business. The technology conglomerate has reported losses for five consecutive years, while the stock price of its banking division has doubled since its initial public offering (IPO) in April 2023.
Hiroyuki Nagai said that he does not expect the Bank of Japan to raise interest rates significantly given the current economic situation in Japan. He said if the Bank of Japan raises interest rates by more than 25 basis points, it may have a negative impact, such as some individuals and businesses may not be able to repay their debts, leading to a rise in default rates. However, Hiroyuki Nagai added that even if this happens, he believes the bank can control default rates because its credit screening uses artificial intelligence beyond traditional methods.
In addition, Rakuten Group is currently negotiating with Rakuten Bank to restructure its financial technology subsidiary. This will give the group the opportunity to generate more cash, with the goal of completing the transaction in October. However, Hiroyuki Nagai said that such a transaction must also be meaningful to minority shareholders of Rakuten Bank. "If we can protect the interests of minority shareholders, we will strive to reach a restructuring agreement. Otherwise, we may reconsider."