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UPDATE 1-Japan Post Bank cut JGB holdings by $78 bln in Oct-Dec
February 12, 2016 / 9:22 AM / in 2 years

UPDATE 1-Japan Post Bank cut JGB holdings by $78 bln in Oct-Dec

* Japan Post Bank manages $1.8 trln investment portfolio

* Portion held in JGBs drops to 40.8 pct end-Dec vs 45.2 end-Sept

* BOJ’s negative interest rates makes it harder to secure returns (Recasts, adds breakdown of portfolio changes)

By Taiga Uranaka

Feb 12 (Reuters) - Japan Post Bank Co Ltd said on Friday its holdings of Japanese government bonds fell $78 billion in quarter ending in December, reducing JGBs share of its total $1.8 trillion portfolio to 40.8 percent from 45.2 percent 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 Co , 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 percent of the portfolio at the end of December from 19.9 percent three month earlier.

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

The bank is one of the biggest institutional investors in the world, with a portfolio valued at 205 trillion yen ($1.8 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. ($1 = 112.5700 yen) (Reporting By Taiga Uranaka; Editing by Simon Cameron-Moore)

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