MNI BRIEF: BOJ Bond Losses Hit JPY875 Bln; First Since 2006

The Bank of Japan recorded its first unrealised losses on Japanese government bonds since 2006 due to rising bond yields caused by central bank rate hikes.

The unrealized loss on JGBs totaled JPY874.9 billion across April-September, making it the first loss since 2006 and the biggest unrealized loss since 1998. It marked a reversal from last year's JPY4.37 trillion profit.

The balance of exchange-traded funds held by the BOJ rose to JPY36.91 trillion at the end of September from JPY36.63 trillion at the end of March. Unrealised profits stood at JPY11.15 trillion, down from JPY14.69 trillion at the end of March.

The BOJ posted a net income of a record JPY1.59 trillion in the first half of fiscal year 2022, up from a net profit of JPY1.05 trillion a year earlier. The rise was due mainly to an increase in foreign exchange-related unrealised profits caused by the yen’s drop against foreign currencies.

Assets held by the BOJ at the end of September totaled JPY685.79 trillion, down JPY38.27 trillion, or 5.3%, from a year before. The outstanding balance of long-term JGBs held by the BOJ at the end of September totaled JPY536.49 trillion, up 6.6% from JPY503.50 trillion a year earlier.

The BOJ's capital adequacy ratio at the end of September was 9.90%, up from 9.29% at the end of March. That ratio is at the low end of the BOJ's desired range for its own capital, which is two percentage points above or below 10%.