Japanese Bank Liquidates 63 Billion Worth of Bonds Dealing a Blow to the US and Europe

Japan’s major banking institution, Norinchukin Bank, has announced a strategy to offset its massive unrealized losses on US and European government bonds with a liquidation value of $6.3 billion. According to Nikkei Asia, the bank’s total assets amount to $68.16 billion, with a target to complete the sale of government bonds by January next year. The expected sales are projected to result in a net loss of 1.5 trillion yen for this fiscal year, three times the bank’s previous forecast. Norinchukin Bank’s CEO, Kazuto Oku, emphasized the need for significant management changes to reduce unrealized losses, which amounted to about 1 trillion yen as of the end of February. Oku outlined the bank’s strategy shift in investments, stating, “We plan to reduce (the country’s) interest rate risk and diversify assets, including credit risks from corporations and individuals.” As of February 23, the bank holds a total of 144 trillion yen in foreign bonds on its balance sheet, equivalent to $1.4 billion. Read more: [img] The intensification of conflicts between Russia and the United States strengthens the Chinese yuan. Japan is the largest foreign holder of US government bonds, with the country’s banks, retirement funds, and other institutions collectively holding $1.87 trillion in US Treasury bonds as of January 2024. Macro strategist Shekar Hari Kumar expressed doubts about the potential impact of Japan’s selling of US government bonds, stating that unless the country’s currency challenge significantly worsens, the sell-off is unlikely to exert significant pressure on the stock market. Kumar added, “If there is a long-term confrontation between the government bond and forex markets, we expect a cascading effect on government bond market yields, especially in the 2 to 5-year bond market, which could affect a wider yield curve.” [img]