After many years of foot-dragging, in the past three years Japanese banks have made great progress in working off their problem loans – under considerable pressure from the government. By and large, the situation has returned to normal. Having come to terms with the past, growth and profitability are now back on the agenda.

10-year government bond yields have risen significantly since the end of May. Now well above the 1.5 % threshold, long-term interest rates are back at the level prior to introduction of the Bank of Japan’s quantitative easing policy in March 2001. These movements signal that the phase of “normalization” of the JGB-market has started.