As the view emerged that the outlook for a BOJ rate hike was already priced in, concerns were voiced over regional banks offsetting unrealized losses with unrealized gains on shares and over simultaneous market declines.
Yagi Minoru (八木 稔), chairman of the Regional Banks Association of Japan, said at a press conference that attention was needed on market conditions in which unrealized losses on bonds and falling share prices are progressing at the same time. Some banks in the regional banking sector are said to be offsetting unrealized losses on bonds with unrealized gains on shares.
Domestic long-term interest rates reached 3% for the first time in 30 years, and the situation has become apparent among regional banks holding unrealized losses on Japanese government bonds purchased in a low-interest-rate environment. Chairman Yagi said, “It is important to note that the inverse correlation between bonds and shares has broken down.” The Nikkei Stock Average is reportedly struggling to move higher after renewing its record high.
With an additional rate hike considered highly likely at the Bank of Japan’s monetary policy meeting scheduled for the 17th and 18th, Yagi said he believed that “the hike is increasingly priced in, so its impact on financial markets will probably be limited.”
The Financial Services Agency is strengthening its monitoring of ultra-long-term home loan products. Yagi said he believed that ultra-long-term loans are “being provided after sufficient explanation and with consideration given to borrowers’ repayment capacity.”