(Bloomberg) — Japan’s farm ministry said a panel of outside experts will examine how Norinchukin, the country’s largest agricultural bank, racked up huge paper losses on its bond holdings.
Most Read from Bloomberg
The action by the ministry, which supervises the bank jointly with the Financial Services Agency, came after Norinchukin warned it is likely to book losses of ¥1.5 trillion ($10.5 billion) for the current fiscal year as a result of offloading unprofitable foreign bonds.
“It’s necessary to examine Norinchukin’s investment and lending activities and its asset management,” the ministry said in a statement announcing the panel.
Norinchukin is unwinding about $67 billion of US and European government bonds this fiscal year after making bad bets on interest rates. The notes began losing money after rate hikes by the US Federal Reserve and other central banks boosted funding costs, leaving Norinchukin needing to raise capital and sell assets to rebalance its ¥50 trillion investment portfolio.
Norinchukin is a key part of the multi-tiered system of Japan’s agricultural cooperatives. Local cooperatives take deposits from and lend to member farmers. But given the tepid funding demand in the country’s agriculture sector, the bulk of the money goes to Norinchukin, which invests it on behalf of the cooperatives.
The Ministry of Agriculture, Forestry and Fisheries said the panel includes academics and financial professionals and will hold a first meeting on Friday. The meeting is closed to the media.
Japanese government ministries set up a panel of outside experts on various topics for fact finding and policy making suggestions. Panels’ recommendations are often reflected in laws and regulations.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.