Japanese Financial Institutions Face Gov Bonds Losses if Yields Rise

Japanese financial institutions with huge government bond holdings face large appraisal losses if yields rise, a Finance Ministry estimate showed Monday.

If yields of outstanding bonds climb 1 percent across the board, the value of outstanding government bonds would drop by an estimated 67 trillion yen ($643 billion), or 13.5 percent of Japan’s nominal gross domestic product in fiscal 2015, according to the ministry.

Under similar circumstances, the ratio was higher than 2.5 percent in Germany as a percentage of its GDP, 4.3 percent in the United States, 5.2 percent in France and 13.3 percent in Britain, the ministry said.

The provisional calculation was presented at a meeting of the ministry’s expert panel to discuss the government’s bond issuance plan for fiscal 2017.

Yields move inversely to bond prices, and bonds with longer maturity dates are susceptible to larger price declines.

via Mainichi

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