From Tokyo to Wall Street! Using the Takaichi New Deal and the Federal Reserve's interest rate cut measures, Mizuho plans to expand the investment banking business footprint

The Zhitong Finance App learned that in an interview with the media, the CEO of Japanese financial giant Mizuho Financial Group (Mizuho) said optimistically that with Japan's biggest fiscal stimulus in recent years promoted by the new Prime Minister Takaichi Sanae and the help of the Federal Reserve's interest rate cut cycle, he believes that the momentum of Mizuho's investment banking business will continue to maintain a strong trend in Japan and the US market where Japan's third-largest loan institution is expanding its business at an accelerated pace.

Mizuho CEO Kihara Masahiro said in an interview with the media on Thursday that Tokyo-based Mizuho has completed the acquisition and integration of the US boutique investment bank Greenhill & Co., which was acquired by Mizuho two years ago and is now beginning to reap actual results after the integration. “We are now able to re-pursue large-scale mergers and acquisitions,” he said in an interview.

Kihara said that the Federal Reserve's overnight interest rate cut will have a very positive impact on Mizuho's business line in the US market. “This growth is likely to continue, which is very beneficial to us.” He expects the Fed to cut interest rates two to three more times in 2026, not just once in 2026 as shown in the latest Federal Reserve FOMC bitmap.

Federal Reserve Chairman Powell's statement after the monetary policy decision did not send a strong hawkish signal that the market was generally concerned about before. At the same time, he announced that measures to buy short-term US bonds were unexpected by the market, driving the US dollar index to weaken sharply. Many Wall Street analysts called the results of this monetary policy meeting and Powell's latest remarks as “just right” neutral results, providing more room for the Asian Central Bank's monetary policy and reducing the pressure on the US dollar's financing costs.

Mizuho CEO Kihara has stated many times in recent years that Mizuho is committed to becoming the top investment bank in Asia and the world. According to the latest statistics compiled by the agency, Mizuho ranked 22nd among global mergers and acquisitions advisory agencies this year. Key participation in core M&A transactions included an agreement reached by 3G Capital to acquire footwear manufacturer Skechers USA Inc. for 9.4 billion US dollars. The Mizuho Investment Bank business division is ranked 7th in the Japanese M&A transaction market, and the volume of Japanese M&A transactions is currently at the second highest level since historical records began.

Kihara said that transactions in the Japanese market were driven by changes in the mentality and thinking of CEOs, who wanted to significantly increase shareholder returns, especially in large capitalization companies. Now this trend is spreading to mid-market companies, and Mizuho has strengthened its capabilities in this field, Kihara said in an interview.

Japan's largest commercial banks are expected to usher in another year of record profits, mainly because relatively high benchmark interest rates in Japan since the Bank of Japan began the interest rate hike cycle have boosted loan-type revenue, and various tariff data have not greatly hindered business. Mizuho previously raised its full-year profit forecast in November. This is the financial institution's second increase in profit for the fiscal year ending March next year. Mizuho's stock price has soared 46% since this year, driven by the Tokyo Stock Exchange's move to increase shareholder returns, driven by a strong rise in the Japanese stock market and driven by the Bank of Japan's interest rate hike cycle.

Kihara said that the new prime minister, Sanae Takaichi, intends to promote further growth in the Japanese economy, which makes Japan's economic growth path more clearly visible.

Takaichi recently introduced the country's largest round of fiscal spending since global COVID-19 restrictions were eased, which also heightened market concerns about Japan's surging public debt. Japanese treasury bonds have fallen sharply this year. In particular, the yield on long-term treasury bonds has risen to a high level in decades, but the Japanese stock market, especially Japanese financial stocks, continues to rise to new high prices, driven by strong fiscal stimulus.

However, Kihara said that as long as the Japanese government maintains proper fiscal discipline, he doesn't think there will be any degree of negative impact. He said that the 10-year Japanese Treasury yield may briefly break through 2% — a level that has not been touched in 19 years, but is expected to remain in a relatively low historical range.

Kihara expects the Bank of Japan to raise interest rates this month, which is basically in line with market expectations. And even if the Bank of Japan raises interest rates again next year, he doesn't think the yen exchange rate will continue to appreciate sharply. He said that the strength of the exchange rate between the yen and the US dollar (USD/JPY) may fluctuate between 145 and 150 yen. On Thursday morning, the USD/JPY exchange rate was 155.64 at the Tokyo market.

Kihara also discussed the bank's continued expansion layout in the Indian and Chinese markets. He said that Mizuho is still in negotiations to acquire shares in Avendus Capital Pvt., a well-known investment bank headquartered in Mumbai, and hopes to reach positive results early next year. Kihara also said that Mizuho intends to expand its presence in the Chinese market and will initially focus on the debt capital market. The company's securities subsidiary received regulatory approval in September to set up a wholly-owned brokerage firm in China and hired the former head of Daiwa Securities in China to lead the entity. “It's a challenge, but I think it's worth doing.” He said in an interview.