Profits in the Japanese banking sector have taken a 1.2 trillion yen (£5.3 billion) hit from the US sub-prime mortgage crisis and the country’s central bank has said that worse turmoil may be on the horizon.

The first estimate of the damage wrought by sub-prime was prepared by Japan’s Financial Services Agency and follows grim first-half earnings figures from Japan’s largest bank, Mitsubishi UFJ Financial Group.

Sub-prime problems left a big dent in the bank’s profits between April and September, which were 49 per cent lower than they had been the year before. According to yesterday’s FSA report, in combination, MUFJ and Japan’s two other “megabanks” have admitted to about 460 billion yen in sub-prime exposure in their first-half earnings.

Total sub-prime related writedowns by the three megabanks amounted to less than £500 million. Despite the colossal size of the banks, which also include Mizuho Financial Group and Sumitomo Mitsui Financial Group, Japanese exposure to sub-prime is low relative to global rivals.

The sub-prime bubble inflated at a time when Japanese banks had only just begun to emerge from their decade-long torpor — they remain highly conservative institutions and were not eager buyers of repackaged US mortgage products.

Regional banks were even less affected, taking a combined hit of about 15 billion yen, according to the FSA. Seiji Nakamura, a board member of the Bank of Japan, said yesterday that it remained “uncertain when adjustments in the US housing market will end”. He added that the central bank was monitoring the US economy closely for signs of a downturn.

“The global economy may deteriorate if the US economy worsens sharply. There is also the possibility that the Japanese economy may be negatively influenced,” he said.

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