BOJ Bond Valuation Losses Are Said to Be $8 Billion in 2015
- Bank’s income still increasing while bond costs soar as well
- Income reduction poised to worsen as bond prices rise
Businessmen walk past the Bank of Japan in Tokyo, Japan, June 08, 2016.
Photographer: Hitoshi Yamada/NurPhoto via Getty ImagesThis article is for subscribers only.
The Bank of Japan wrote down the value of its holdings of government debt by 874 billion yen ($8.5 billion) in the last fiscal year, undercutting the income from its still profitable asset-purchase program.
With yields below zero, the central bank is buying debt at prices higher than the face value. As the bank purchases and holds debt until maturity, it doesn’t value the bonds at market price but takes the markdown gradually so that at maturity the book value equals the principal.