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$63,000,000,000 in US Treasuries and European Bonds to be liquidated as unrealized losses hit major Japanese bank
The Japanese banking giant announced a plan to liquidate $63 billion of U.S. and European Treasuries in an attempt to mitigate the huge amount of unrealized losses on its balance sheet.
Japan's Norinchukin Bank, which has total assets of $681.6 billion, plans to complete its sovereign bond sale by March next year, Nikkei Asia reports.
The sales will bring the bank's net loss for the current fiscal year to 1.5 trillion yen, three times the bank's previous estimate.
â[Bank CEO Kazuto Oku] said the bank ârecognized the need to radically change its managementâ to reduce unrealized losses on its bonds, which stood at about 2.2 trillion yen at the end of March.
Oku explained the bank's intention to shift its investments, saying: "We will reduce [sovereign] interest rate risk and diversify assets that take on corporate and individual credit risk."
As of March, the banking giant had a total of 23 trillion yen, or $144 billion, in foreign bonds on its balance sheet.
Japan is the largest foreign holder of U.S. Treasury securities, with national banks, pension funds and other institutions holding $1.87 trillion as of March 2024.
A few weeks ago, Japan's Ministry of Finance said it had intervened to support the yen after it fell to a 34-year low against the US dollar.
Macro strategist Shekhar Hari Kumar told Reuters he doubts Japan will put much selling pressure on US Treasuries - unless the country's currency struggle gets significantly worse.
âJapanese selling (of dollars) will not put much pressure on the Treasury market right now.
But in the unlikely event that the Treasury engages in a prolonged battle with the foreign exchange markets, we can expect some impact on Treasury market yields, particularly in the 2-5 year segment, with the potential for spillover effects to the rest of the curve.â
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