The risk facing Japanese banks from their vast holdings of government bonds has been underlined by the chief executive of the country’s largest bank who said it would struggle to reduce its exposure.
Nobuyuki Hirano, chief executive of Bank of Tokyo-Mitsubishi[BTMU], admitted that the bank’s Y40tn ($485bn) holdings of Japanese government bonds were a major risk but said he was powerless to do much about it. “This is analysts’ main concern,” he told the Financial Times. “A default of JGBs would have a severe impact on us. But we need to be responsible to keep that market in order.”
According to data produced by the Bank for International Settlements, and published last week by the Bank of England, the holdings of JGBs by Japan’s banks equate to 900 per cent of their tier one capital, compared with about 25 per cent for UK banks’ exposure to gilts and 100 per cent for US banks’ exposure to US Treasuries.