BOJ books 1st unrealized bond loss under Kuroda in fiscal half

The Bank of Japan said Monday it booked an unrealized loss of 874.9 billion yen ($6.3 billion) on its government bond holdings in the six months to September, the first under Governor Haruhiko Kuroda, after bond prices fell amid global monetary tightening.

The loss, the largest for the BOJ since fiscal 1998 under the current accounting standards, came as the central bank ramped up bond buying to keep borrowing costs at rock-bottom levels against a global tide of monetary tightening. Bond prices move inversely to yields.

The BOJ saw its total assets decline 5.3 percent from the same period a year earlier to 685.79 trillion yen as of the end of September, marking the first drop since Kuroda took the helm in 2013, as demand for loans extended to help ride out the COVID-19 crisis decreased.

Loans totaled 80.14 trillion yen, down 42.1 percent from a year earlier.

Japanese government bond yields faced upward pressure, tracking their overseas peers as major central banks such as the U.S. Federal Reserve moved to monetary tightening to rein in soaring inflation.

The BOJ faced market pressure to tweak its easing monetary policy but it has retained its dovish stance. It scrambled to defend its upper limit on the benchmark yield on 10-year Japanese government bonds by offering to buy unlimited amounts of them at a fixed rate of 0.25 percent.

At the end of September, the market value of the BOJ's government bond holdings stood at 544,646.2 billion yen, compared with a book value of 545,521.1 billion yen.

The last time the BOJ booked an unrealized loss on government bonds was in 2006 when its quantitative easing policy ended.

Governor Kuroda has forged ahead with powerful easing since assuming the post and has repeatedly said it is too early to discuss an exit from monetary easing. But the expanding balance sheet poses a formidable challenge for the central bank when it does decide to trim it.

Kuroda takes the view that the BOJ's ultraeasy policy should be in place to support the economy and achieve its 2 percent inflation target stably and sustainably, accompanied by more robust wage growth. His term as BOJ chief ends next April.

© Kyodo News