Investopedia: A Sustainable Boost To Japan's Banks?

Before long the focus in Japan will shift from disaster response to recovery and rebuilding. Both the structure of the Japanese financial system and the experience of past natural disasters strongly suggest that Japan's banks will play a major role in the reconstruction effort. What remains to be soon, though, is whether Japanese banks can find a way to navigate the tricky demographics and economic situation of Japan and find a path to sustainable growth.

Policy Concerns Move to the Back Burner
Before the Eastern Earthquake, investors were concerned about how Japan's large banks would navigate regulatory changes, particularly new rules about capital requirements. With the Bank of Japan ramming liquidity into the system and significant reconstruction needs, it is likely that Japanese bank officials are not going to regard Basel III standards as their top priority.

That is a particularly favorable development for Mizuho Financial (NYSE:MFG), as this bank had the most left to do in terms of getting its balance sheet in shape. By the same token, having stronger balance sheets going into this crisis should give Mitsubishi UFJ (NYSE:MTU) and Sumitomo Mitsui (Nasdaq:SMFG) more flexibility in expanding its loan book. (For more, see Banking: Introduction.) 
 
Loan Demand Likely To Reverse Sharply
One of the major problems for the top three banks in Japan (Mitsubishi, Mizuho and Sumitomo) has been flagging loan demand. Smaller regional banks have seen some market share growth, due in part to the fact that banks like Shizuoka Bank, Suruga Bank, Bank of Kyoto and Bank of Yokohama have been keeping a lid on their fee increases relative to the larger banks. For the larger banks, though, it is has been more and more difficult to wring growth from core lending operations. 

To read the full text, click the link below:
http://stocks.investopedia.com/stock-analysis/2011/A-Sustainable-Boost-To-Japanese-Banks-MTU-MFG-SMFG-SNE-C-BAC-PC0321.aspx