Japan's top three banks on Wednesday posted bumper annual profits owing to a surging domestic stock market, but warned that their inflated bottom lines would shrink this year.

Mitsubishi UFJ, the country's biggest lender, led the pack with net profit in the fiscal year to March of 984.8 billion yen ($9.6 billion), up 15.5 percent.

Mitsubishi's results, mirrored by record profits at smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group, come as their stock trading businesses benefited from a surge in the Japanese market last year.

For the year to March, Sumitomo said net income rose 5.2 percent year-on-year to 835.36 billion yen, while Mizuho booked a net profit of 688.4 billion yen, up 23 percent.

Driving the rise was a 57 percent return in the Nikkei 225 stock index last year -- its best annual run in more than four decades.

Overseas investors poured billions of dollars into the long-overlooked market as a government economy blitz helped pushed down the value of the yen, which lifted profits among Japanese firms that do business overseas.

Government infrastructure plans in the aftermath of the 2011 quake-tsunami disaster as well as building projects for Tokyo's hosting of the 2020 Olympics may help stimulate demand for borrowing among firms.

Also helping boost the so-called megabanks' fortunes were falling credit costs, stronger fee income from financial product sales and a reduction in bad loans, analysts said.

But the Nikkei is down 12 percent so far this year and some of the shine is coming off Prime Minister Shinzo Abe's growth drive, dubbed Abenomics, as concerns mount over the strength of Japan's recovery.

"Banks benefited from rallies in the stock market that helped lift profits to levels seen before the 2008 financial crisis," said Naoko Nemoto, banking analyst with Standard and Poor's rating agency.

"But I'm not sure about the sustainability of the growth -- their lending in Japan is not growing that much."

Uncertainty about the economy may hold back borrowing by firms and individuals, after Japan raised its sales tax on April 1 for the first time in 17 years.

There are fears the levy hike -- seen as crucial to chopping a massive national debt -- would weigh on consumer spending and hold back the wider economy.

Japanese lenders have been cutting back on their reliance on domestic government bonds -- a key profit driver in recent years -- as the Bank of Japan's huge bond-buying measures announced in April start to reshape the country's debt markets.

The BOJ's programme, which is a cornerstone of Tokyo's bid to overcome years of deflation, unsettled the domestic debt market, prompting Japanese banks to further trim their exposure.

For the year to March 2015, Mitsubishi said it expected a net profit of 950 billion yen, down about four percent from the just-ended fiscal year.

Mizuho said its net income would shrink about 20 percent for the same period, while it would be down about 19 percent at Sumitomo.

"Core banking profitability should remain weak amid narrowing loan margins and limited sustained growth in private credit," Fitch ratings agency said in a report.