Japan's financial giant Mizuho Financial Group (Mizuho) is optimistic about the momentum of its investment banking business, both domestically and in the U.S., where it is accelerating expansion. The confidence stems from Japan's largest fiscal stimulus in years under new Prime Minister Sanae Takaichi and the Federal Reserve's rate-cutting cycle, according to CEO Masahiro Kihara.
In a media interview on Thursday, Kihara highlighted that Mizuho has completed the acquisition and integration of U.S. boutique investment bank Greenhill & Co., purchased two years ago, and is now seeing tangible results. "We are now able to pursue large-scale M&A deals again," he said.
Kihara noted that the Fed's recent rate cut will significantly benefit Mizuho's U.S. operations. "This growth momentum is likely to continue, which is very favorable for us." He expects two to three more Fed rate cuts in 2026, contrary to the latest FOMC dot plot projecting just one.
Fed Chair Jerome Powell’s post-meeting remarks avoided the hawkish tone markets feared, while the announcement of short-term Treasury purchases surprised investors, weakening the dollar. Wall Street analysts described the outcome as a "Goldilocks" neutral result, easing dollar funding costs and giving Asian central banks more policy flexibility.
Kihara has repeatedly emphasized Mizuho’s ambition to become a top-tier investment bank in Asia and globally. Recent data ranks Mizuho 22nd in global M&A advisory, with key deals including 3G Capital’s $9.4 billion acquisition of Skechers USA Inc. In Japan, Mizuho ranks seventh in M&A advisory, with deal volumes near historic highs.
Kihara attributed Japan’s dealmaking surge to shifting CEO mindsets, particularly in large-cap firms seeking higher shareholder returns—a trend now spreading to mid-cap companies, where Mizuho has strengthened its capabilities.
Japan’s major banks anticipate another record profit year, driven by higher domestic lending income amid the Bank of Japan’s (BOJ) rate hikes, with minimal tariff disruptions. Mizuho raised its full-year profit forecast in November—its second upward revision for the fiscal year ending March 2025.
Mizuho’s shares have surged 46% this year, fueled by the Tokyo Stock Exchange’s push for shareholder returns and the BOJ’s tightening cycle. Kihara sees clearer economic growth prospects under Prime Minister Takaichi, who recently unveiled Japan’s largest fiscal stimulus since the pandemic, though concerns over soaring public debt persist.
Japanese government bonds have slumped this year, with long-term yields hitting multi-decade highs, while stocks—especially financials—continue rallying on stimulus optimism. Kihara downplayed risks, stating that as long as fiscal discipline is maintained, no major negative shocks are expected. He sees the 10-year JGB yield briefly exceeding 2%—a level untouched in 19 years—but remaining historically low.
Kihara expects the BOJ to hike rates this month, aligning with market consensus. Even with further hikes in 2025, he does not foresee significant yen appreciation, predicting USD/JPY to fluctuate between 145–150. Early Thursday in Tokyo, the pair traded at 155.64.
The CEO also discussed Mizuho’s expansion in India and China. Talks continue to acquire a stake in Mumbai-based Avendus Capital Pvt., with hopes for a deal early next year. In China, Mizuho plans to grow its presence, initially focusing on debt capital markets. Its securities subsidiary received regulatory approval in September to establish a wholly owned brokerage, led by a former Daiwa Securities China head.
"It’s a challenge, but worth pursuing," Kihara said.
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