Padangekspres.net-ation's commercial banks have steadily increased their presence in overseas markets, with the outstanding balance of their loans in the Asian region hitting an all-time high at US$211.9 billion as of the end of 2011, up 24 percent from the year before, according to the Bank for International Settlements.
The overseas expansion is being spearheaded by three huge banking groups: Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group (MHFG).
There are surging expectations, particularly in other parts of Asia, for Japanese banks to play a larger role as loans from European banks shrink, analysts say.
In their settlement of accounts for the business year that ended on March 31 this year, the three banking groups are expected to chalk up a combined 1.9 trillion yen in after-tax consolidated profits, the highest in five years.
A major factor behind the strong business performance of the banks is the growth of their operations in other Asian nations and regions, and other areas outside Japan, the analysts said.
The 24 percent increase to $211.9 billion in the outstanding balance of loans of Japanese banks abroad as of the end of 2011 was disclosed in the latest BIS statistics.
By country, China topped the list of borrowers from Japanese banks, registering a 28 percent year-on-year rise, followed by Malaysia, which had an increase of 26 percent from a year earlier.
The outstanding balance of loans by Mizuho Financial Group to the Asian region increased to more than double its level of two years ago, the analysts noted.
European banks, by contrast, saw their loans to the Asian region fall by $94.5 billion in the six-month period from the end of June last year, according to the BIS.
Taking the place of European banks, banks from Japan have become major lenders in the international financial markets, the analysts pointed out.
It is becoming increasingly common for local manufacturers in Asia and Europe, to be provided with yen-denominated loans from Japanese banks, they said.
Due to the strength of the yen, Japanese banks have been bullish toward corporate buyout deals abroad.
In January, SMFG, in a joint action with group firms such as Sumitomo Corp., purchased the aircraft leasing division of the Royal Bank of Scotland, one of Britain's major banks, for about $7.2 billion.
Meanwhile, MUFG took over a US regional banking group, Pacific Capital Bancorp, in March.
MUFG, which is the nation's largest financial group, said it is considering spending a maximum of about ¥1 trillion ($12.51 billion) on the acquisition of overseas companies, especially for those in the United States.
The desire by Japanese banks to increase their operations abroad comes as the domestic financial markets stagnate.
Each year, profits from overseas operations account for larger percentages of the profits of many Japanese banks.
About 27 percent from SMFG's overall profits at the end of 2011 came from overseas operations. This is an increase of five percentage points from the year before.
A senior official of a large bank said his company will "continue to put energy into boosting profits from overseas at least for the next one to two years."
However, the cost of purchasing business divisions from European banks has been increasing recently.
As a further tightening of the regulations involving ratios of net worth to total assets of banks is likely, banks must refrain from purchasing too many businesses abroad.
As banks become more deeply involved in markets outside Japan, they become more exposed to risk and Europe's debt crisis, the analysts said.
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