A bank operating in Japan’s least populated area is doing something that may have global repercussions if its peers do the same: the lender is planning to return to the nation’s bonds in a big way as interest rates rise.
Like many of its competitors, San-in Godo Bank had purchased U.S. debt in recent years to earn much higher returns than Japanese government bonds, but it suffered losses after the U.S. Federal Reserve started to aggressively raise interest rates in 2022. It made little sense for banks to buy JGBs when benchmark 10-year yields were hovering around zero, but their recent climb to above 1% at one point has made the bonds more desirable.
"JGBs are going to be our mainstay,” said Toru Yamasaki, president of San-in Godo, in an interview. "If we can buy JGBs, they are better for a regional bank like ours” than foreign debt, he said, adding that his bank once had ¥1 trillion ($7 billion) worth of domestic notes, but its holdings are now less than half of that.
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