Japanese banks are financially robust and there is no immediate threat to the sector and the financial system despite rising credit-related costs, the head of an industry lobby group said on Thursday.

The remark came after Japan's three biggest banks - Mitsubishi UFJ Financial Group Inc (MUFG), Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc - estimated a collective 1.1 trillion yen ($10.3 billion) of credit-related costs for this fiscal year amid the coronavirus pandemic.

"Japanese banks are in reasonable financial health, compared to the time of the global financial crisis, and no financial instability is occurring at this moment," Kanetsugu Mike told reporters at a regular press briefing.

"Rising credit-related costs don't mean the banking sector and the financial system will immediately face a serious impact," said Mike, who is also the head of MUFG's banking unit.

As the coronavirus outbreak has eroded company profits, the government has urged financial institutions to help finance virus-hit firms. The Bank of Japan earlier this week also increased the nominal size of its lending packages for cash-strapped firms to $1 trillion from about $700 billion announced last month.

Outstanding loans by Japanese banks as at end-May were 531 trillion yen ($4.97 trillion), up 6.4% year on a year earlier, the sharpest rise since 1999, Mike said.

In an interview with Reuters this month, Mizuho's chief executive Tatsufumi Sakai said coronavirus-related loan requests to the bank had reached 17 trillion yen since the outbreak began, with 10 trillion yen in loans and credit lines having been agreed.

(Reporting by Takashi Umekawa; Editing by Chris Gallagher and Richard Pullin)