“Higher rates could erode finances if central bank moves toward easing exit…”

Bank of Japan’s paper loss on JGB holdings grows to record $71bn

Higher rates could erode finances if central bank moves toward easing exit

TOKYO — The Bank of Japan’s unrealized losses on its Japanese government bond holdings swelled to 10.5 trillion yen ($71.2 billion) at the end of September, according to financial statements released Tuesday, as rising yields dragged down bond prices.

This marked the central bank’s third straight half-year paper loss on JGBs, and the largest since it began valuing them under its current method in 2004, smashing the previous record of 874.9 billion yen set in September 2022. The bank reported its first yearly paper loss in 17 years for the fiscal year ended this past March.

The BOJ assumes that its bonds are held to maturity, meaning that paper losses based on market prices have no bearing on its actual income. But any market worries about the central bank’s finances could have an impact on currency markets and interest rates.