Why Japan megabanks' big gains could be short-lived

Effects of monetary easing could be temporal.

According to SNL Financial, while the side effects of monetary easing and other stimulus have been a boon for many financial institutions, so far there has been only a minimal rise in lending because Japanese companies are holding back from major increases in capital spending.

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Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. registered fairly good first-half net profit growth, but their full-year profit in the financial year ending March 31, 2014, will grow only by single digits or decline because of narrowing margins and slow growth in loan volumes.

Analysts say the boost from rising share prices and falling credit costs is a one-off event that will not carry over. The weakening of the Japanese yen to about ¥100 per U.S. dollar from about ¥80 per dollar a year earlier boosted the banks' loan growth in yen terms, but the yen is unlikely to weaken much further.

Abe's reflationary policies have pumped up share prices since late 2012, with the benchmark Nikkei 225 average up 65% over a year earlier at the end of September.

The three banks have all seen stock prices rise by at least 73% annually to Nov. 15, while the SNL Asia-Pacific Bank Index has risen by only 13.79%.