The Bank of Japan said Monday it had an unrealized loss of 157.1 billion yen ($1.1 billion) on its record-high government bond holdings in fiscal 2022 for the first such loss in 17 years, after it ramped up bond-buying to keep yields low despite a global trend of monetary tightening.
The BOJ's total assets for the previous fiscal year through March fell for the first time in 11 years, down 0.2 percent, to 735.12 trillion yen, hurt by a drop in loans extended to financial institutions as part of its efforts to boost funds to cope with the COVID-19 pandemic.
Bond-buying has been a key pillar of the BOJ's monetary easing policy but its huge presence in the bond market and its impact on pricing has drawn criticism. The central bank expanded the trading range for 10-year yields in a surprise move in December, fueling market speculation it could move away from its dovish stance.
Bond holdings rose 10.6 percent to 581.72 trillion yen in book value, the largest-ever on a fiscal year basis, though its market value came to 581.56 trillion yen, translating into an unrealized loss of 157.1 billion yen.
The BOJ ramped up bond-buying to defend its limit on 10-year bond yields, while overseas yields rose as major central banks went ahead with interest rate hikes. Bond yields move inversely to prices.
The BOJ has made a point of holding government bonds until maturity and the latest unrealized loss does not affect the central bank immediately.
New BOJ Governor Kazuo Ueda has said it is necessary to retain monetary easing to ensure stable inflation accompanied by robust wage growth.
The central bank has decided to spend up to 18 months carrying out a broad review of its monetary policy over the past quarter century, during which it struggled to tackle deflation and achieve price stability.
