C.  Challenges for Japanese financial institutions: micro perspective  I will next talk about two specific challenges for Japanese financial institutions. I will touch on the challenges for the authorities in the final part of my speech.
Selecting business models and sustained improvement in profitability The first and the biggest challenge for Japanese financial institutions is to raise their profitability in a sustained manner. Looking at the recent business performance of Japanese financial institutions, core profitability has been trending down due partly to a narrowing profit margin and declining lending outstanding.