BOJ Sees 6.4 Trillion Yen Losses at Lenders on Rate Increase

Japanese banks would face a total of 6.4 trillion yen ($79 billion) in valuation losses on their holdings of government bonds if Japan’s interest rates increased 1 percentage point, the Bank of Japan (8301) said in its semi-annual financial system report.

Possible losses at major banks would total 3.4 trillion yen, while those at regional banks would amount to 3 trillion yen, the bank said, citing its own estimates based on data to Dec. 31.

The average maturity of Japanese debt held by large lenders is about 2.5 years and about 4 years for regional banks, according to the report.

The yield on Japan’s benchmark 10-year bonds today rose half a basis point to 0.94 percent, after hitting a 17-month low of 0.93 percent earlier this week.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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