BOJ posts biggest net loss on record due to stock market declines

TOKYO Wed Nov 28, 2012 4:19am EST

TOKYO Nov 28 (Reuters) - The Bank of Japan said on Wednesday it posted its biggest net loss on record at the end of September as declines in stocks weighed on its equity holdings.

The BOJ's capital-to-asset ratio, a measure of financial health, also fell to the lowest level in more than three decades as the amount of bank notes increased, which could raise questions about the limits of the central bank's purchases of riskier assets.

The central bank booked a net loss of 232.9 billion yen ($2.83 billion) in the first half of the fiscal year that started in April, which was 96.6 billion yen more than it lost in the same period a year earlier.

Losses on equities that the BOJ bought several years ago to stabilise financial markets widened to 152.0 billion yen in the fiscal first half from a 73.7 billion yen loss in the same period a year earlier, according to its financial results.

The capital-to-asset ratio stood at 7.12 percent at the end of September, the lowest since 6.30 percent at the end of March 1980.

The capital-to-asset ratio has remained below 8 percent, the minimum level the BOJ deems desirable for fiscal health, for 10 straight years as it adds non-conventional assets to its balance sheet to pump money into an economy struggling to shake off deflation.

Unrealised losses on exchange-traded funds (ETFs) stood at 46.9 billion yen in September versus unrealised gains of 84.7 billion yen at the end of March.

The BOJ said it had unrealised gains of 4.0 billion yen on its holdings of real estate investment trusts (REITs), up from 200 million yen in March.

The BOJ has been buying ETFs and REITs under an asset buying scheme that it launched in October last year to support the economy and fight deflation.

Japan's Nikkei 225 share average has rebounded about 5 percent since end September.

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