Japan’s banks could suffer $1.1 trillion bond loss if BoJ pivots

Citing the latest data from the Japanese Bankers Association, Bloomberg reported on Tuesday, the country’s banks could suffer losses on their government bonds to the tune of $1.1 trillion should the Bank of Japan (BoJ) loosen its grip on 10-year JGB yields.

“Japan’s financial regulator is examining how vulnerable lenders would be to a sudden slump in government bonds should the nation’s central bank pivot away from its ultra-loose monetary policy in future,” per Bloomberg.

Earlier this month, BoJ Deputy Governor Masayoshi Amamiya said that the central bank could incur an unrealized loss of JPY28.6 trillion ($211 billion) on its holdings of Japanese government bonds if yields rise by 1%,

Market reaction

USD/JPY is off the highs, defending gains at around 137.80, at the time of writing.