The Bank of Japan (BOJ) has suffered a loss of approximately 8.8 trillion yen ($68 billion) in unrealized profits on its government bond holdings, according to Governor Haruhiko Kuroda. He reported that as of December 2022, the book value of BOJ’s government bond holdings was 564.1 trillion yen, while their market value was 555.3 trillion yen.
Over the last three months, the unrealized losses have increased ten-fold from 874.9 billion yen at the end of September. This is due to the jump in government bond yields as a result of expectations of the BOJ tightening its monetary policy.
In December, the BOJ shifted its ultra-loose monetary policy, increasing the yield on the 10-year Japanese government bond to 0.5% from the previous cap of 0.25%. This prompted the central bank to step up its bond buying in order to prevent the 10-year yield from surpassing its new ceiling.
Governor Kuroda assured that the unrealized losses will not have an immediate impact on the BOJ as they have adopted a policy of holding government bonds until maturity. However, they are keeping a close eye on the central bank’s fiscal health.
Experts have warned that if the unrealized losses continue to increase and the market begins to question the BOJ’s financial condition, it could affect interest rates and exchange rates.