(Bloomberg) -- Shares of Japanese banks — which are seen as the most vulnerable in Asia to the turmoil gripping the US banking sector — underperformed as trading resumed after the Golden Week holiday.

A sub-gauge of bank shares on the Topix fell as much as 1.2% early Monday, compared with little changes for the broader benchmark. Japanese lenders’ stocks suffered the most in Asia in March during the selloff spurred by the collapse of Silicon Valley Bank, as investors fretted over their outsized Treasury holdings and interest-rate risks.

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“The main trigger is high interest rates. And in that sense, I think the weakest link in Asia is the Japanese banks,” including the nation’s regional banks and other unlisted lenders, said Michael Makdad, senior analyst at Morningstar Inc.

Fears of further failures at US regional lenders pushed the KBW Bank Index down 7.4% last week, though a strong rally on Friday saw the gauge close off its weekly low. With Japanese markets closed Wednesday-Friday, a Bloomberg gauge of Asian lenders rose 2.2% for the week. Analysts have said since March that they see limited contagion risks for Asia as a whole thanks to capital buffers and looser financial conditions than in the US.

Japanese banks have loaded up on US Treasuries as years of massive easing depressed yields at home. While that exposed them to paper losses on bond holdings amid the Fed’s tightening, Japanese officials have downplayed the risk of an SVB-like event unfolding given the lenders’ sticky deposit base and strong balance sheets.

The Topix Banks Index slumped 17% in a little more than two weeks in March, and has since been trending slowly upward.

The Bank of Japan in April said Japanese banks have reduced interest-rate risk and the financial system remains sound despite stresses seen in the US and Europe. The nation’s Financial Services Agency has also urged lenders to check their readiness to respond to risks from social media and internet banking after the collapse of several US bank. 

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