Japan’s lenders have turned the corner

For years, Japanese banks have been the ultimate value trap — cheap on paper, flush with cash and backed by rock-solid balance sheets, yet consistently underwhelming for global investors.

The sector has long struggled with low profitability, a result of the country’s ultra-low interest rate environment and inefficient capital allocation. But that narrative is slowly starting to change.

Interest rates are rising in Japan. The Bank of Japan raised its key policy rate to the highest level since 2008 last month. Higher rates are boosting net interest margins, profits and share prices of Japan’s largest lenders