TOKYO (Nikkei)--The International Monetary Fund has asked Japanese financial institutions to estimate the losses they stand to incur on government bonds if long-term interest rates were to rise to around 2.5%, The Nikkei reported early Friday.
The aim is to assess how higher interest rates could impact the finances of Japanese banks, which have big holdings of JGBs. The figures will be based on asset data as of the end of September and are expected to be made public as early as the summer.
Under the hypothetical scenario presented by the IMF, 10-year Japanese government bond yields would rise by 1.5 percentage points from Thursday's close at 0.955%--harsher conditions than those envisioned under a similar estimate by the Bank of Japan.
Domestic banks could incur Y6.3 trillion in valuation losses if long-term rates were to rise 1 percentage point, BOJ Gov. Masaaki Shirakawa said at a Feb. 23 lower house budget committee meeting.
The nation's three megabanks have reportedly submitted their projections through fiscal 2013 to the Financial Services Agency, which will pass them on to the IMF. In addition to banks, life insurance companies and others might also be asked to provide figures.
In 2010, the IMF decided it would examine the health of financial systems in developed nations every five years. It has already conducted similar surveys in the U.K. and Germany.
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