International digital bank Barclays said profits at its Japan unit could rise significantly amid a rebound in trading in Japan's debt market and interest rates.
Kosuke Morihara, Chief Executive Officer of Barclays Securities Japan Limited (BSJL), reported an increase in yen-related orders both at home and abroad as many of the bank's overseas institutional clients expect the country's interest rates to rise.
Based on this trend, Morihara said, "BSJL may reach record high figures unless there is a significant change in the market situation."
"For the first time in a long time, Japan is finally at the center of global investors' attention," he added.
Recent decisions by the Bank of Japan to stimulate the $7.2 trillion bond market have boosted activity there, Bloomberg reported. It has also triggered an influx of new players into the market and has had a positive impact on many companies, including Barclays.
Investor interest in Japan's 2023 bond market has helped BSJL increase its YTD profit, which is expected to surpass its record 2022 profit of $100 million.
BSJL's profit growth is important for Britain's largest banking group, which is looking to cut costs after a number of Barclays units missed estimates in the third quarter.
However, Sundarararajan Venkatakrishnan, Chief Executive Officer of Barclays, announced that this procedure will not affect most of the Asian units due to the profitability and business development in the region.
It is worth noting that in 2022, the profit of Barclays Securities Japan Limited accounted for 30% of the revenue of all Asian divisions.
Stephen Dainton, Global Head of Markets at Barclays, confirmed that Japan has become attractive to investors again, with the central bank providing "substantial liquidity" in yen swaps and Japanese government bonds.
"For the first time in a long time, yen rates are attracting global attention and change," Morihara said.
On Nov. 1, the yield on the benchmark 10-year JGB hit a 10-year high of 0.97 percent, and bond volatility earlier this year hit its highest level since 2008 as the Bank of Japan eased its yield curve control policy.
Still, Barclays expects the BOJ to move from negative to positive interest rates in April 2024. The short-term rate is expected to rise to 0.2% by the end of 2024.
"You can't control the yield curve or negative rates forever," Morihara concluded.
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