Top Japan bank plans for JGB sell-off, no near-term shift seen
Thanks to Will for passing this along.
(Reuters) - Japan's top banking group, Mitsubishi UFJ Financial (8306.T), has drawn up a contingency plan that flags 2016 as the time when the nation's current account may slide into deficit and trigger a government bond sell-off, a newspaper reported on Thursday.
Asahi newspaper said a plan prepared by a unit of the group -- Bank of Tokyo-Mitsubishi UFJ -- late last year estimated that 10-year bond yields could rise to around 3.5 percent in about four years' time from about 1 percent today.
It said that in such case the bank, which held about 3 trillion yen ($39.41 billion) of bonds with more than 10 years to maturity, would sell as much as possible of those bonds and shift to short-term bills.
For more than a decade, Japan's government has been able to fund its snowballing debt at home and at minimal cost thanks to a vast pool of domestic savings and Japanese investors' aversion to assets they perceive as riskier, such as shares and foreign bonds.
But many economists, ratings agencies and even some Japanese policymakers warn that this may change in coming years as Japan's debt pile continues to grow, while an aging population and dwindling current account surplus will weigh on savings.
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