Japan Local Banks Face Expansion in Losses on Foreign Bonds

Economy

Tokyo, April 1 (Jiji Press)--Recent interest rate spikes abroad, including in the United States, are leading to an expansion in latent losses on foreign bonds held by regional banks in Japan.

Japanese regional financial institutions have increased investment in foreign bonds as an alternative to Japanese government bonds, following falls in domestic interest rates partly attributed to the Bank of Japan's negative interest rate policy.

But overseas interest rates are rising sharply reflecting moves for monetary tightening by Western central banks, including the U.S. Federal Reserve, dealing a blow to regional financial institutions in Japan. Bond prices fall when interest rates go up.

Key for these institutions will be whether they can dispose of losses stemming from higher interest rates quickly and carry out asset management flexibly by reviewing their portfolios or through other measures, analysts said.

According to the BOJ, the combined balance of investment in foreign bonds at regional banks and shinkin banks stood at 19.5 trillion yen at the end of September 2021, coming close to the peak level marked at the end of 2016.

[Copyright The Jiji Press, Ltd.]

Jiji Press