Reuters blog archive
By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Bank of Japan’s bond-buying is proving to be more of a blessing for the country’s lenders than for the deflation-stricken economy. The central bank’s spending spree has allowed lenders to offload 12 percent of their holdings of government debt this year.
Swapping some of the banks’ 142 trillion yen ($1.43 trillion) of government bonds for newly minted cash is the prudent thing to do. When the BOJ’s money-printing ends and the 10-year bond yield rises from its current level of 0.7 percent, banks are at risk of suffering large mark-to-market losses on their portfolios. Government bond holdings have fallen this year to 16 percent of banks’ total assets, down from 18 percent.
If Prime Minister Shinzo Abe is to succeed in ending deflation, banks mustn’t stop at shrinking their exposure to the government; they must also lend more. However, given that Japanese companies’ own cash hoards are at a five-year high, credit growth is more likely to be a crawl than a gallop.
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
The recent spike in Japan’s bond yields is not a canary in the country’s debt mine. Though the yield on 10-year government bonds has almost doubled since the Bank of Japan announced its aggressive money-printing pledge on April 4, it’s still less than 0.9 percent. Before the 2008 financial crisis, yields were twice as high.
from The Great Debate UK:
-Jane Foley is research director at Forex.com. The opinions expressed are her own.-
Perhaps the oddest side-effect of the Greece debt crisis has been its ability to drag Japan’s budget into the spotlight.