By Anton Bridge
TOKYO (Reuters) -Norinchukin Bank on Thursday reported a net loss of 1.81 trillion yen ($12.63 billion) for the year ended March 2025 as it sold off its portfolio of U.S. and European government bonds.
The bonds had plummeted in value when interest rates in the U.S. and Europe began to rise from 2022 and remained higher for longer than anticipated. In June last year, Norinchukin Bank said it would sell down some of the bonds to stem the losses.
Over the year it sold off 17.3 trillion yen ($120.94 billion) of low-yielding assets, mostly U.S. and European government bonds – positions it had built up in search of higher returns during the years of negative interest rates in Japan.
Norinchukin said it still had 1.2 trillion yen of unrealised losses on its bond portfolio at the end of March this year, but forecast a profit of between 30 billion yen and 70 billion yen for its current financial year which ends in March 2026.
“With uncertainty in the global economy, including from the Trump administration, there’s no room for complacency,” chief executive Taro Kitabayashi told a press briefing in Tokyo.
Chief Financial Officer Masaki Nagano told the press briefing Norinchukin was not immediately impacted by the spike in yields of long-term sovereign bonds this week as the bank does not hold ultra long-term foreign bonds.
But if the higher yields persist it could lead to unrealised losses and the bank would consider using interest rate hedges as a way of managing the risk, Nagano said.
Japanese government bond yields have also shot up, but Norinchukin is adopting a very cautious stance on Japanese bond purchases on the expectation that domestic interest rates will continue to rise, Nagano added.
The bank is the principal financial institution for Japan’s farm, forestry and fishery cooperatives and has a business model centred on securities investments rather than generating income from lending.
As such it has not benefited from the rise in domestic interest rates that has been a boon for the banking sector. Japan’s three largest banking groups posted record annual profits last week.
The bank has also become one of the world’s largest investors in collateralised loan obligations (CLOs) and held 8.3 trillion yen worth of the securities at the end of March, according to its results presentation.
Norinchukin had 40.3 trillion yen in market assets at the end of March, down from 59.5 trillion yen at the end of March 2022.
($1 = 143.3400 yen)
(Reporting by Anton Bridge; Editing by Jacqueline Wong, Joe Bavier and Jane Merriman)
