Daiwa Securities Group Inc.

Daiwa Securities Group announced on the 1st that it has signed a basic agreement with Yamagata Bank for a comprehensive business alliance centered on the asset management field. Yamagata Bank's over-the-counter sales accounts for investment trusts and public bonds will be succeeded to and integrated into Daiwa Securities, after which Daiwa Securities will entrust financial instrument intermediary services to Yamagata Bank, combining the regional customer base with the securities firm's expertise to strengthen consulting functions covering asset building as well as inheritance and business succession. The two companies aim to conclude a final contract by the end of March 2027 and plan to launch the new framework during 2028, and they said that at this point the impact of the alliance on consolidated earnings is minor. According to the two companies, in Yamagata Prefecture the share of securities in household financial assets is about 9 percent, below the national average of about 25 percent, and dependence on deposits and savings is high. Daiwa Securities has been expanding its asset management business through alliances with regional banks, including comprehensive alliances with Shikoku Bank and Iwate Bank.

With the yield on new 10-year government bonds, a benchmark for long-term interest rates, hovering near 3%, corporate funding costs are rising, but demand for funds for capital investment and M&A remains strong. Companies are struggling to control costs by shortening the maturity of corporate bonds, while also rushing to develop overseas and individual investors. Against the backdrop of rising government bond yields, there is a clear trend of corporate bonds with higher spreads attracting demand, and Sumitomo Forestry's public hybrid bond of approximately 250 billion yen drew orders of over 700 billion yen, nearly three times the issue amount. According to the Ministry of Finance's Financial Statements Statistics of Corporations, capital investment in the April-June 2026 quarter increased 1.6% year-on-year to over 13 trillion yen across all industries, and the Bank of Japan's June Tankan survey showed that large enterprises' fiscal 2026 capital investment plans rose 11.5% year-on-year. Meanwhile, regional banks, shinkin banks, and credit cooperatives, which were major buyers, have shifted to issuing their own bonds, and pension funds and asset management companies are increasing their presence. Companies that cannot secure the necessary funds from domestic institutional investors alone are expanding their funding sources to overseas and individual investors, with SoftBank Group issuing individual bonds worth 1 trillion yen domestically. According to Daiwa Securities' estimates, Japanese companies' dollar bond issuance approached 100 billion dollars in 2025, and has already reached about 50 billion dollars in 2026.

The market has raised the probability that the Bank of Japan will raise interest rates at its September 18 meeting to 82%, up from just 23% before the July meeting. Senior BOJ officials are scheduled to deliver several speeches before the meeting, which will be watched for signals supporting or opposing this rate hike. Deputy Governor Ryozo Himino is due to speak this Thursday, while Governor Kazuo Ueda may comment after the G20 meeting in the United States next week. BOJ board members Hajime Takata and Kazuyuki Masu will speak on September 2 and September 10 respectively. Kento Minami, senior economist at Daiwa Securities, believes the BOJ may not explicitly say it will raise rates, but will emphasize upside inflation risks, which the market will interpret as opening the door for a rate hike next month. A key support comes from the United States and Japan jointly intervening in currency markets in late July for the first time since 1998, helping pull the yen back from levels near 160 yen per dollar. US Treasury Secretary Scott Bessent said monetary policy needs to follow through on the currency intervention measures, and expressed confidence that the BOJ will take necessary action.

SoftBank Group filed an amended shelf registration statement with the Kanto Finance Bureau on the 24th for a corporate bond issuance of around 1 trillion yen. The bonds will have a maturity date of September 16, 2033, making them seven-year notes, with an indicative coupon range of 4.3 to 4.9 percent per annum to be set on September 4. The subscription period runs from September 7 to 16, with payment due on September 17. Eleven firms, including Nomura Securities, Daiwa Securities, and SMBC Nikko Securities, are underwriting the offering.

Share buyback authorizations by Japanese companies are increasing at the fastest pace on record, reaching about 12.7 trillion yen from April 2026 through August 12. According to data from Daiwa Securities, TOPIX constituents set buyback authorizations of 10.5 trillion yen from April through the end of August 2025, and this fiscal year the figure reached 12.7 trillion yen as of August 12, after the earnings season passed its peak. Although the periods differ and cannot be compared directly, the amount already exceeds the previous year's full-year result by more than 2 trillion yen. Behind this are a stronger stance on shareholder returns and the revised Corporate Governance Code published by the Tokyo Stock Exchange and the Financial Services Agency on July 21, which includes language requiring boards of directors to continuously review the effective use of cash, deposits, and financial assets. Daisuke Hashizume of Daiwa Securities pointed out that buyback announcements are a sign of confidence in companies' earnings outlooks, while Jun Ishikane of Mitsubishi UFJ Asset Management said they tend to be well received by overseas investors and can be expected to attract fund inflows. With the TOPIX recently setting record highs day after day, the overall tone of Japanese equities is firm, and the spread of buybacks is likely to be seen as a factor supporting share prices.

The five major securities firms, including Nomura Holdings, have all reported their consolidated results for the April–June 2026 quarter, with every firm booking a sharp rise in profit. Rising interest rates spurred active bond trading, while higher stock prices, led by semiconductor-related shares, boosted brokerage commission income. Sales of discretionary investment products such as investment trusts and fund wraps also grew. Nomura Holdings posted a net profit of 145.5 billion yen, up 39.2 percent from the same period a year earlier. Daiwa Securities Group reported a net profit of 56.4 billion yen, up 80.6 percent. SMBC Nikko Securities saw its net profit jump 2.5 times to 26.7 billion yen. Mitsubishi UFJ Securities Holdings recorded a net profit of 49.4 billion yen, a 3.4-fold increase, while Mizuho Securities posted a net profit of 31.5 billion yen, up 72.6 percent. Business with institutional investors and investment banking operations handling M&A and other deals also drove performance.

Daiwa Securities Group Chief Financial Officer Kotaro Yoshida said the coordinated Japan-US currency intervention is an unusual signal showing authorities' clear stance against yen depreciation, but noted that structural yen weakness will not be resolved quickly after the intervention. He added that continued yen weakness will influence the Bank of Japan's policy decisions, and expressed the view that the BOJ will continue raising interest rates.

Daiwa Securities Group reported net profit of 56.4 billion yen for the April–June quarter, up 80.6% from the same period a year earlier. The company did not disclose a full-year forecast, but the average estimate of seven analysts polled by IBES for consolidated net profit in the fiscal year ending March 2027 stands at 196.7 billion yen.

SBI Securities, Daiwa Securities, SBI Digital Markets, Penguin Securities, and BOOSTRY announced on July 8 the results of a proof-of-concept aimed at cross-border distribution of domestically issued security tokens. Limited to inter-dealer transactions with overseas securities firms, the test verified a configuration enabling delivery-versus-payment settlement using security tokens and the stablecoin USDC on the public blockchain Ethereum. Management for domestic investors is conducted on the consortium-based platform ibet for Fin, with the target security tokens mirrored onto Ethereum only when transacting with overseas securities firms. The proof-of-concept confirmed the potential to leverage a public blockchain while maintaining domestic rights management, and also addressed issues such as gas fee management, private key management, and legal and tax considerations. SBI Securities and Daiwa Securities conducted risk assessments of the platform's safety and reported to self-regulatory organizations.

Iwate Bank President Toru Iwayama has indicated that business integrations and mergers are among the options, given the declining population and rising burden of digital investment. While stating there are no concrete discussions at this time, he said the bank wants to flexibly explore the optimal approach, including partnerships with other industries. Regarding the comprehensive business alliance with Akita Bank, he said the goal of boosting combined ordinary profit by 3.04 billion yen over the five-year period through fiscal 2026 is expected to be achieved, and expressed eagerness to strengthen collaboration. On the business alliance with Daiwa Securities, he explained that the bank aims to enhance its asset-building business and increase both deposits and assets under custody, revealing that about 50 people have been seconded from Daiwa Securities to the Asset Consulting Department launched this April. In Iwate Prefecture, there are three banks in total: Iwate Bank, North Japan Bank, and Tohoku Bank, in which SBI Holdings has a stake. On the topic of prefectural realignment, he merely commented that the three banks may currently be fulfilling their roles well.