Japan Post Bank cut government bond holdings by US$78 billion in Oct-Dec

TOKYO (REUTERS) - Japan Post Bank said on Friday its holdings of Japanese government bonds fell US$78 billion (S$108 billion) in quarter ending in December, reducing JGBs share of its total US$1.8 trillion portfolio to 40.8 per cent from 45.2 per cent in previous quarter.

The Bank of Japan's surprise decision to introduce negative interest rate last month is likely to add to the difficulty of managing the bank's massive portfolio, as it has been building up reserves at the central bank amid a general lack of attractive investment alternatives.

Officials at the bank, a unit of Japan Post Holdings, said most of the decrease in JGB holdings was caused by not reinvesting in JGBs after the bonds came to redemption.

During the same period, the bank increased its investment in dollar- and euro-denominated sovereign and corporate bonds, which rose to 21.4 per cent of the portfolio at the end of December from 19.9 per cent three month earlier.

But the biggest increase took place at the category that includes reserves parked at the BOJ, which rose to 26.8 per cent of the portfolio at the end of December, from 23.9 per cent three months earlier.

The bank is one of the biggest institutional investors in the world, with a portfolio valued at 205 trillion yen (S$2.5 trillion).

Its investment has traditionally been made up mostly of JGBs but ultra-low interest rates have encouraged it to seek assets offering higher yields.

At an earnings briefing on Friday, a Japan Post Holdings executive said its banking and insurance units could review their investment portfolio next financial year due to the Bank of Japan's negative interest rate policy.

"This financial year, there's not going to be much in the way of an impact on earnings but if the situation continues then there will be an impact, not just on us but for all financial institutions," Noboru Ichikura, a Japan Post managing executive, said.