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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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza