Japan’s FSA showed a source indicating an approximate number of the country’s regional banks have lost money on their foreign bond investments along with the recent rise in the United States long-term yields.
According to Japan’s Financial Services Agency, around 20 regional banks in Japan have experienced losses on their foreign bond, according to FSA these banks were the ones the agency singled out its review in 2016 and are ask to improve their performance. Despite these loss, Taro Aso, Japan’s Finance Minister claimed that even though regional banks have experienced capital losses on their foreign bond investments, it has not reached a dangerous level.
Many of these smaller banks have manage to stay due to securities trading, despite of the ongoing negative interest rate policy issued by the Bank of Japan; however, these small regional banks’ bond investment have taken a hit, followed by concerns that these banks could face more problems ahead, as some of these regional banks holds about half of Japan’s $4 trillion bank loans.
In addition, FSA also mentioned that over half of the country’s 100 regional banks also lost their money on their core lending and fees businesses in 2018 to March 2017 indicating profits declining faster than expected. The Financial Services Agency administered a corresponding investigation when the U.S. yields skyrocketed after Donald Trump was elected president in 2016.