MNI POLICY: BOJ Net H1 FY19 Profit Up; Draws Down FX Reserves

     TOKYO (MNI) - The Bank of Japan said Wednesday that it posted a net profit

of Y921.4 billion in the first half of fiscal year 2019, up from a net profit of

Y827.9 billion a year earlier.

     The increase was largely due to a draw down of foreign exchange reserves to

offset losses stemming from the drop of the value of its foreign currency assets

following the yen's gains -- losses that totalled Y186.1 billion, reversing from

profits of Y409.6 billion.

     The yen stood at Y108.08 against the dollar and Y117.80 against the euro at

the end of September, compared with Y113.69 and Y131.98 at the end of September

2018.

     Interest payments on government bond holdings totalled Y623.1 billion in

the April-September period, down from Y646.1 billion a year earlier. The BOJ

also posted a pre-tax profit of Y921.4 billion for the first half of this fiscal

year, down from a profit of Y1.046 trillion in the 6 months to September 2018.

     --TRANSFERS

     The central bank is putting roughly half of its interest income from

Japanese government securities into reserves as a provision against the losses

it will likely face when it eventually ends its large-scale monetary easing.

     The BOJ transferred Y202.5 billion to a provision for possible losses on

bond transactions, down from the transfer of Y222.9 billion a year earlier.

Assets held by the BOJ at the end of September totalled Y569.8 trillion, up

Y24.1 trillion, or 4.4%, from Y545.7 trillion a year before.

     The rise in assets was due to further outright JGB purchases. Although the

monthly pace of JGB buying by the BOJ fluctuates under the yield curve control

policy framework, the overall balance of holdings have increasing every year

since the start of aggressive easing in April 2013.

     --ADEQUACY RATIO

     The BOJ's capital adequacy ratio at the end of September was 8.62%, down to

8.71% 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%.

     The outstanding balance of long-term JGBs held by the BOJ at the end of

September totalled Y469.4 trillion, up from Y447.4 trillion a year earlier.

     The balance of ETF (exchange-traded fund) held by held by the BOJ totalled

Y27.47 trillion, up from Y21.65 trillion at the end of September 2018 and

unrealized profits of ETFs was Y3.99 trillion, up from Y3.91 trillion at the end

of March.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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