Japan's three major financial groups have reported record-breaking interim profits for the current fiscal year, while regulatory scrutiny intensifies following revelations of improper lending practices at a regional credit union. These developments highlight both the strengthening financial sector and the ongoing challenges in maintaining proper banking standards. According to NHK, Japan's three largest financial groups—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group—all achieved their highest-ever interim net profits for the period ending September 2025. The primary driver behind this exceptional performance was the increase in interest income, particularly from corporate lending, as Japan's interest rate environment continues to normalize after decades of ultra-low rates. For foreign residents and businesses operating in Japan, this shift represents a significant change in the financial landscape. The Bank of Japan's gradual move away from its long-standing negative interest rate policy has created a more traditional banking environment where interest income from loans has become a substantial revenue source for financial institutions. This trend suggests that borrowing costs for both individuals and businesses are likely to continue rising, making it increasingly important for expats to review their loan arrangements and consider refinancing options if they locked in higher rates recently. The record profits also indicate that Japan's major banks are in strong financial health, which should provide reassurance to foreign residents holding deposits or conducting business with these institutions. The improved profitability stems not only from higher interest margins but also reflects the banks' diversified revenue streams and improved operational efficiency. However, not all news from Japan's financial sector has been positive. NHK reported that Iwaki Shinyo Kumiai, a credit union based in Fukushima Prefecture, has submitted a business improvement plan to regulators following revelations of substantial cash payments to anti-social forces. The institution announced salary reductions for executives to clarify management responsibility and has committed to severing all ties with organized crime groups. This case serves as a reminder that Japan maintains strict regulations against financial institutions conducting business with anti-social forces, known locally as "hanshakai-teki seiryoku." These regulations are part of Japan's comprehensive framework to prevent money laundering and organized crime financing. Foreign business owners and executives should be aware that Japanese banks conduct thorough due diligence on their clients and may terminate relationships if any connections to anti-social forces are discovered. For expats running businesses in Japan, the Iwaki case underscores the importance of maintaining transparent business practices and ensuring that all partnerships and transactions comply with Japanese anti-organized crime regulations. Foreign-owned businesses are subject to the same scrutiny as domestic companies, and violations can result in severe consequences, including the loss of banking relationships and potential legal action. The contrasting stories—record profits at major institutions alongside regulatory enforcement at smaller ones—demonstrate that Japan's financial sector is both thriving and closely monitored. The Financial Services Agency continues to maintain rigorous oversight of all financial institutions, regardless of size. Looking ahead, expats should expect the current interest rate trend to continue, potentially making savings accounts more attractive while increasing borrowing costs. Those with variable-rate mortgages or business loans should budget for higher interest payments in the coming months. Additionally, the strong performance of major banks suggests stability in Japan's financial system, which is positive news for long-term residents and investors. The regulatory action against Iwaki Shinyo Kumiai also reinforces that compliance with anti-money laundering and anti-organized crime regulations remains a top priority for Japanese authorities, something all foreign businesses operating in Japan must take seriously.