The Japanese banking industry warns that rising Japanese bond yields may cause write-offs and profit shocks

The Zhitong Finance App has learned that major Japanese banking industry organizations have warned that Japanese treasury yields may continue to rise, and banks face the risk of asset write-down and loss of profits. Chairman of the Japan Bankers Association and Mizuho Bank Governor Masahiko Kato said at a press conference on Thursday that the continued rise in Japanese treasury yields may result in asset write-down and realized losses. He said that banks will probably not rush to increase their holdings of Japanese treasury bonds until yield prospects are more clear and policy interest rates peak.

Over the past two years, rising interest rates have boosted Japan's largest banks to record profits by expanding loan margins. At the same time, however, unrealized losses on Japanese treasury bonds held by these banks continued to rise as yields soared. So far, this hasn't caused much of a problem because banks are able to hold these bonds until maturity.

The head of Japan's financial regulator said this month that it is closely monitoring whether banks properly manage the risks posed by rising interest rates to all of their businesses, including bond holdings, corporate loans, and ultra-long-term mortgages. Financial Services Director Yutaka Ito said in an interview that from an overall perspective of the industry, book losses are at a “manageable level,” and regulators will not guide banks and other institutions exactly how to handle these losses.

The yield on Japan's 10-year treasury bonds recently hit 3%, a 30-year high. Investors expect the Bank of Japan to raise interest rates further due to heightened fiscal concerns. The market generally expects the Bank of Japan to raise the policy interest rate to 1.25% on Friday.

Kato said that key interest rates are still loose, and the Bank of Japan is expected to raise interest rates further. He also expressed hope that Prime Minister Takaichi Sanae's new cabinet will implement policies conducive to the country's sustainable growth and financial market stability.

According to reports, Japanese Prime Minister Sanae Takaichi retained core members in the cabinet reshuffle announced on Thursday. This is the first time she has reshuffled the cabinet since coming to power in October 2025. Analysts believe that against the backdrop of continued sluggish cabinet approval ratings, Sanae Takaichi will consolidate the foundation of administration and pave the way for the fall National Assembly agenda by recruiting Navi Shinkai into the cabinet.