Barclays Plc is expecting another year of record profit in Japan on the back of the country’s debt and rates market trading resurgence, marking a bright spot for the UK lender as it struggles elsewhere.

The bank’s Japan entities are getting more yen rates-related orders from home and abroad, with many overseas institutional clients betting that local interest rates will rise, according to Kosuke Morihara, chief executive officer for the country. It may add to headcount if trading income keeps growing, he said.

Profit after tax “could reach an all-time high if there is no material change in the market situation,” Morihara said in an interview. “Japan has finally come to the center of the radar of global investors for the first time in a while.”

The market activity has already helped to boost earnings at Barclays’ Japanese securities arm this year, which is likely to surpass 2022’s record profit of 15.1 billion yen ($100 million), he said.

The Bank of Japan has taken steps over recent months to liberate the debt market from years of its control, breathing life into trading business and sparking competition among financial firms to hire experts. These policy tweaks have enlivened the nation’s once-sleepy $7.2 trillion government bond market, generating more trading business for a slew of firms including Barclays.

It’s particularly a welcome boost for the British banking group, as it plans to cut costs after its trading division missed estimates in the third quarter. Chief Executive Officer C.S. Venkatakrishnan said in an interview this month that Asia will be largely spared from the bulk of job cuts due to its growing businesses in the region.

Japan generated about 30% of net revenue in Asia last year, according to Morihara. “Markets business is at the center of our operations,” he said, adding that yen rates and credit are among areas that are growing.

Stephen Dainton, co-head of global markets, says Japan has re-emerged as a place of interest over the past year. The bank is providing “significant liquidity” in yen swaps and Japanese government bonds, he said in an interview this month.

“For the first time in a long time, yen interest rates are attracting the spotlight, and are moving,” Morihara said. “I expect this situation will continue into next year.”

Gone are the days when the trading floor for Japanese government bonds or yen rates was quiet, said Morihara, who used to head Barclays’ fixed income financing in Asia Pacific. The firm’s traders and salespeople in Tokyo “are now busy,” he said, adding that “they say that now is the most fun time.”

The yield on the benchmark 10-year JGB hit a decade-year high of 0.97% on Nov. 1, and volatility in bonds reached a level unseen since 2008 earlier this year. The Bank of Japan loosened its so-called yield curve control policy in October, although it’s persisting with negative interest rates to achieve its inflation target.

Under Barclays’ “base case” scenario, the BOJ will end negative rates in April and raise the short-term rate to as high as 0.2% by the end of 2024. The forecast follows signals from central bank officials that they are finally winning the decades-long battle against deflation.

“There is no doubt that you can’t continue yield curve control or negative rates forever,” Morihara said. “It is a matter of when. The time is gradually ripening for that.”

--With assistance from Ambereen Choudhury and Masaki Kondo.