Japan Megabanks Signal Return to JGBs as Yield Outlook Improves Despite Valuation Losses

Economic

Summary:

Japan’s largest banks are preparing to gradually increase their Japanese government bond holdings as yields stabilize and income prospects improve, even as unrealized losses on existing bond portfolios remain elevated....

Shift In Strategy As Yield Environment Changes

Japan’s biggest lenders are signaling a potential turning point in their long-standing retreat from Japanese government bonds. After years of reducing exposure due to ultra-low interest rates, both Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group say they are ready to rebuild JGB holdings as rising yields begin to offer more attractive returns.

Over the past decade, the banks had steadily trimmed their bond portfolios because returns were compressed under the Bank of Japan’s prolonged accommodative policy. That backdrop is now shifting, as higher interest rates improve the income outlook for government debt, prompting management teams to reassess their positioning.

Recent Yield Volatility And Market Stabilization

JGB yields climbed sharply from November, a move linked to fiscal expansion expectations following spending plans outlined by Prime Minister Sanae Takaichi. The surge weighed on bond valuations, pushing unrealized losses higher across bank balance sheets. However, market conditions have calmed in recent weeks.

Demand at the last four government debt auctions has been resilient, and the 30-year JGB yield has fallen by 32 basis points from its January 20 record high of 3.88%. This easing has helped stabilize expectations and reduced immediate pressure on bond prices.

Takayuki Hara, managing director and head of the CFO office at MUFG, said the bank would move carefully but sees scope to rebuild positions as long-term rates show signs of peaking.

Unrealized Losses Remain A Key Constraint

Despite the improved outlook, valuation losses remain substantial. MUFG reported unrealized losses of 200 billion yen on its bond portfolio at the end of the year, sharply higher than the 40 billion yen recorded at the end of March. The bank noted that sales of longer-duration bonds between September and December helped limit further damage.

SMFG faces a similar situation. Its unrealized losses on JGBs more than doubled to 98 billion yen over the nine months to December. Management acknowledged the impact of rising yields on bond prices but emphasized plans to increase holdings gradually while monitoring market conditions.

The experience highlights a structural challenge for banks: when yields rise, bond income improves over time, but the immediate effect is a decline in the market value of bonds purchased at lower rates. This relationship is a valuation effect rather than a deterioration in credit quality.

Duration Strategy And Cautious Re-Entry

In recent years, Japan’s megabanks have favored short-duration bonds to limit interest rate risk. Mizuho Financial Group, the third-largest lender, reported an average remaining maturity of just 1.8 years for its JGB holdings at the end of December.

Analysts expect this cautious stance to persist in the near term. Further rate hikes by the Bank of Japan and concerns over Japan’s large public debt load could still push yields higher, making banks reluctant to add longer-duration exposure too quickly.

Some market participants see a clearer entry point later. Toshinobu Chiba of Simplex Asset Management said the JGB yield curve could continue to rise, with the 10-year yield potentially reaching 2.5%, compared with its current level of around 2.195%. Such a move could offer a more compelling risk-return balance for banks.

Earnings Momentum Supported By Higher Rates

The broader rate environment has already boosted profitability across the sector. The Bank of Japan raised rates for the first time in 17 years in March 2024 and has delivered three additional hikes since, taking the policy rate to 0.75%. That shift has helped Japan’s megabanks forecast record profits for the current financial year.

Equity markets have reflected this improvement. The Topix banking index has doubled since the initial rate hike in March 2024, far outperforming the broader Topix index’s 33% gain.

Looking further ahead, analysts see scope for higher yields on longer-duration JGBs to support earnings growth. Goldman Sachs analyst Makoto Kuroda recently raised profit forecasts for the 2028 financial year for MUFG, SMFG, and Mizuho, citing higher rates, stronger yields, and a weaker yen. Net profit estimates were lifted by 20%, 11%, and 21% respectively.

For Japan’s largest banks, the renewed interest in JGBs reflects a calculated trade-off. While unrealized losses remain a near-term headwind, management teams appear increasingly focused on the longer-term income potential of higher-yielding government bonds. If yields stabilize and policy tightening progresses gradually, JGBs may once again become a core pillar of megabank balance sheets, supporting earnings momentum in the years ahead.

Source: TradingView

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Gerik

Economic

Cryptocurrency

Global Risk Sentiment Turns Cautious

U.S. futures and Asian equities traded mostly lower on Friday, extending losses from Wall Street as another wave of selling hit technology stocks. The pullback reflected growing concern over whether massive artificial intelligence investments by major technology firms will deliver returns quickly enough to justify current valuations. That uncertainty spilled across regions, pushing investors toward a more defensive stance.

Bitcoin also weakened alongside equities, reinforcing the perception that cryptocurrencies are behaving more like high-risk assets than safe havens during periods of market stress.

Bitcoin Gives Back Trump-Era Gains

Bitcoin dropped about 9% in early Asian trading, hovering just under $65,000 after briefly falling more than 12% below $64,000 a day earlier. The move leaves the cryptocurrency trading at roughly half of its record level above $124,000 reached in October. The entire rally that followed the election victory of Donald Trump has now been erased.

The decline reflects dimming enthusiasm as investors reassess the impact of tighter financial conditions, fading momentum, and heavy positioning built up during the earlier rally. Rather than acting as a hedge, Bitcoin has moved in tandem with risk assets during the technology-led sell-off.

Mixed Performance Across Asian Markets

Asian equity markets showed broad weakness, though the degree varied by country. Japan’s Nikkei 225 managed to recover modestly, rising 0.5% as technology-related stocks rebounded from earlier losses. SoftBank Group gained nearly 2%, while Tokyo Electron advanced more than 3%. Political developments also drew attention, with Japan heading into a general election in which Prime Minister Sanae Takaichi is seeking a stronger mandate.

In contrast, South Korea’s Kospi fell 1.7%, weighed down by technology shares. Samsung Electronics declined nearly 1%, while SK Hynix also traded lower. Hong Kong’s Hang Seng Index dropped 1.2%, while mainland China’s Shanghai Composite was little changed. Australia’s S&P/ASX 200 slid 1.6%, reflecting weakness across multiple sectors, and Taiwan’s Taiex edged down slightly.

Wall Street Losses Set the Tone

The negative lead came from U.S. markets, where all three major indexes closed sharply lower. The S&P 500 fell 1.2% for its sixth loss in seven sessions, while the Dow Jones Industrial Average dropped a similar amount. The Nasdaq Composite led declines with a 1.6% fall as technology stocks remained under pressure.

Several high-profile names weighed on sentiment. Qualcomm sank 8.5% despite beating revenue expectations, as investors focused on cautious outlook signals. Alphabet slipped as markets reacted to its heavy AI spending plans. Amazon fell sharply in after-hours trading after announcing a major increase in capital expenditure focused on AI and infrastructure.

Concerns were further amplified by developments in the AI space, including new tools from Anthropic that raised fears of disruption across traditional software and services, adding to pressure on tech valuations.

Commodities And Currencies Reflect Volatility

Safe-haven assets also showed sharp swings. Gold prices fell around 1% to about $4,843 per ounce after nearing $5,600 last week, while silver dropped more than 6% to roughly $71 per ounce following extreme volatility earlier in the week. Oil prices edged higher, with U.S. crude trading above $63 a barrel and Brent near $68, suggesting energy markets were less affected by the equity sell-off.

In currency markets, the U.S. dollar weakened slightly against the Japanese yen, while the euro edged higher against the dollar, reflecting shifting risk sentiment rather than a clear macroeconomic trigger.

The synchronized decline in technology stocks, cryptocurrencies, and several Asian equity markets highlights how tightly linked global risk assets have become. With uncertainty lingering over AI investment returns and financial conditions still restrictive, markets remain vulnerable to further volatility. For now, Bitcoin’s slide alongside equities underscores that investor confidence, rather than isolated asset-specific factors, is driving the current market mood.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Commodity

Prices Break Key Threshold Amid Prolonged Downtrend

Iron ore futures dropped below the $100-a-ton mark, extending their decline for a fourth consecutive week, the longest losing streak since June. Futures for 61% iron-content material fell as much as 1.1% to $99.55 a ton in Singapore trading, underscoring persistent downside pressure. This move places iron ore back below a psychologically important level that had last been breached in August, although that earlier dip was based on higher-grade 62% material.

The price weakness reflects not a sudden shock but a continuation of deteriorating fundamentals, as demand indicators fail to offset ample supply.

China Demand Softens Ahead of Lunar New Year

Demand conditions in China weakened as steel producers scaled back activity ahead of the week-long Lunar New Year holiday starting in mid-February. Hot-metal output at Chinese mills grew more slowly than expected, signaling muted steel production momentum at a time when restocking activity has already ended. Seasonal restocking typically offers price support, but its conclusion has removed a key buffer against falling prices.

This slowdown is causally linked to the timing of the holiday and broader caution among steelmakers, rather than a temporary logistical disruption.

Rising Inventories Reinforce Bearish Fundamentals

Iron ore stockpiles at Chinese ports and mills continued to climb, reinforcing the perception of an oversupplied market. Port inventories rose for a tenth straight week, increasing 0.6% to 160 million tons, according to data from a sample of ports. This marks the highest level since 2022 and brings holdings close to the record reached in 2018.

The accumulation of inventories reflects both slower downstream consumption and steady inflows of seaborne supply. It may also partly reflect the impact of a pricing dispute between BHP Group and China Mineral Resources Group, which has affected shipment flows and stock management decisions.

Supply Growth Adds Structural Pressure

On the supply side, iron ore availability continues to expand. Major miners in Australia and Brazil have increased production, while additional volumes are expected as new projects come online. Notably, the Simandou project in Guinea is scheduled to ramp up this year, adding further supply to the seaborne market.

Together, these developments point to a structural oversupply situation rather than a short-term imbalance, amplifying downward pressure on prices.

Weather Disruptions Offer Limited Relief

There were some short-term logistical developments, with Pilbara Ports in Australia announcing that berths at key export hubs such as Port Hedland, Dampier, and the Ports of Ashburton would be cleared due to an approaching storm. While gales and faster-than-expected storm development could temporarily affect shipments, the market reaction suggests such disruptions are insufficient to materially tighten supply under current conditions.

With weak steel demand, elevated inventories, and expanding global supply, iron ore market fundamentals remain under pressure. The fall below $100 highlights how the balance of risks continues to skew to the downside unless a meaningful rebound in Chinese steel demand or a sustained supply constraint emerges in the coming months.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Winkelmann

Central Bank

Data Interpretation

Remarks of Officials

Forex

Economic

The Reserve Bank of India (RBI) has held its key policy rate steady at 5.25%, signaling growing confidence in the nation's economic trajectory after the United States scaled back trade tariffs.

The decision to maintain the rate at its lowest level was widely anticipated, aligning with the consensus from a Reuters poll of 70 economists. It follows a 25-basis-point cut from 5.5% at the central bank's previous meeting in December.

Tariff De-escalation Eases Pressure for Easing

A key factor behind the central bank's pause is the recent breakthrough in U.S.-India trade relations. The move comes just days after Washington announced it would reduce tariffs on Indian exports to 18%. This provides significant relief for India, which had been contending with cumulative tariffs of 50% on goods sent to the U.S., its largest trading partner, since August of last year.

Faced with those trade headwinds and a broader economic slowdown, the RBI had aggressively cut its key policy rate by 125 basis points over 2025 to stimulate growth. This easing cycle was supported by record-low inflation and government policy reforms, including changes to income tax brackets and lower consumption taxes.

Madhavi Arora, chief economist at Emkay Global, noted the improved environment. "The monetary policy committee faces a more supportive external backdrop, aided by the U.S.-India trade resolution, which should help stabilize the current account, FPI flows, and [the rupee]," she wrote in a note that correctly predicted the rate hold.

Economic Growth Forecasts Strengthen

The improved trade outlook reinforces positive domestic data. India's official statistics office projects the economy will grow 7.4% in the fiscal year ending in March, a notable increase from the 6.5% growth recorded in the previous fiscal year.

This forecast is backed by recent performance, with the economy expanding 8.2% in the quarter ending in September, accelerating from 7.8% growth in the prior quarter.

Inflation Remains Well Below Target

While the RBI is focused on growth, its mandate also requires maintaining price stability. On this front, the central bank has ample room to maneuver.

Although retail inflation rose from 0.71% to 1.33% in December, it remains significantly below the RBI's 4% target. In its last meeting, the central bank forecasted that inflation for the fiscal year through March would come in at 2%.

Rupee Rallies on Improved Trade News

The positive shift in the trade landscape has already had a tangible impact on currency markets. The Indian rupee, which had previously fallen to record lows amid foreign investor outflows, appreciated by more than 1% the day after the U.S. announced the tariff reduction. The RBI is also known to intervene in currency markets to manage volatility when necessary.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

James Riley

Middle East Situation

Political

Remarks of Officials

The United States has issued an urgent security alert, advising American citizens to "leave Iran now" as tensions escalate ahead of high-stakes diplomatic talks scheduled for Friday in Oman. The notice from the U.S. Virtual Embassy in Iran cautioned Americans to arrange for their departure without relying on assistance from the U.S. government.

The alert comes as representatives from Washington and Tehran prepare for their first official meeting since a major flare-up last year, with little sign of common ground on the agenda.

Iranian special forces stand guard in Tehran, reflecting the heightened security situation across the country.

High-Stakes Talks Clouded by Uncertainty

The U.S. delegation for the talks is set to include Special Envoy Steve Witkoff and Jared Kushner, son-in-law of President Donald Trump. They are expected to meet with a team led by Iran's Foreign Minister, Abbas Araghchi.

This meeting marks the first formal dialogue between the two nations since June of last year, when a 12-day war between Iran and Israel prompted U.S. airstrikes that caused severe damage to Iran's three primary nuclear facilities.

However, significant disagreements over the format and location of the talks have cast a shadow over their potential for success, leaving the possibility of U.S. military action on the table. The negotiations were initially planned to take place in Istanbul, with Turkey acting as a key mediator alongside other regional powers like Egypt, Qatar, and Saudi Arabia.

On Tuesday, Tehran requested a last-minute change, moving the meeting to Oman and restricting it to only Iranian and American officials.

Core Disputes Fueling the Standoff

The diplomatic maneuvering unfolds against a backdrop of increasing military pressure. The U.S. has been building up its forces in the Gulf, and President Trump recently intensified his rhetoric, threatening military strikes if Tehran fails to meet a list of American demands.

According to reports, the U.S. government's key demands include:

• The complete disposal of Iran's enriched uranium stockpile.

• Strict limits on Tehran's ballistic missile program.

• An end to the arming and funding of militant groups across the Middle East.

Iran has rejected these terms, describing them as an unacceptable violation of its national sovereignty. Tehran has warned it will respond forcefully to any attack by striking U.S. military targets in the region as well as Israel.

Military Buildup and Internal Pressures

The current standoff is further complicated by Iran's internal situation. Tensions escalated earlier this year following nationwide protests, which were met with a severe government crackdown. According to the Human Rights Activists News Agency, a Washington-based organization, at least 6,883 people had been killed as of Wednesday.

While President Trump had previously threatened to intervene in support of the protestors, he ultimately did not take military action at that time.

Risk Warnings and Disclaimers

Add to Favorites

Michelle

Central Bank

Political

Data Interpretation

Remarks of Officials

Economic

Japan's economy is expected to have returned to growth in the final quarter of 2025, reversing a significant contraction from the previous period. A Reuters poll of economists indicates that the recovery was fueled by strong corporate investment and resilient consumer activity.

Forecast Points to 1.6% Annualized GDP Growth

The median forecast among 16 economists suggests that Japan's real gross domestic product (GDP) expanded at an annualized rate of 1.6% in the October-December period. This marks a notable turnaround from the 2.3% drop recorded in the third quarter, which was the steepest decline in two years.

Without annualization, the quarterly growth rate is estimated at 0.4%. According to Naoki Hattori, chief Japan economist at Mizuho Research & Technologies, this return to expansion "would confirm that the Japanese economy remains on a gradual recovery path."

What's Driving the Expected Recovery?

The anticipated growth is primarily supported by two key pillars of the domestic economy: business spending and private consumption.

Strong Corporate Investment Leads the Way

Capital expenditure is seen as a major driver, projected to have grown by 0.8% after contracting 0.2% in the previous quarter. This rebound is underpinned by positive business sentiment, as a Bank of Japan (BOJ) survey in December showed that confidence among large manufacturers had reached a four-year high.

Consumption Remains Resilient Despite Inflation

Private consumption, which accounts for more than half of Japan's GDP, is forecast to have edged up by 0.1%. This modest growth is considered resilient, as it occurred while consumer inflation continued to run above the Bank of Japan's 2% target, putting pressure on household budgets.

Trade and Monetary Policy Factors

External demand also played a positive role, while the economic data influenced central bank policy. Net exports are estimated to have added 0.1 percentage points to fourth-quarter GDP growth. This contrasts with the third quarter, when trade subtracted 0.2 percentage points from growth, partly due to the initial impact of U.S. tariffs on exports.

The milder-than-expected economic fallout from the tariffs appears to have given the Bank of Japan confidence. The central bank raised interest rates to 0.75% from 0.5% in December and later upgraded its forecasts for both economic growth and inflation.

Looking ahead, Prime Minister Sanae Takaichi has committed to boosting the economy with proactive fiscal policy, a pledge made in the run-up to a snap election on Sunday. These promises sent government bond yields to record highs last month.

The official preliminary GDP data for the fourth quarter of 2025 will be released by the government on February 16 at 8:50 a.m. local time (2350 GMT on February 15).

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Cryptocurrency

A Sharp Decline That Challenges Expectations

Bitcoin’s slide from above $126,000 in October to below $64,000 has erased gains accumulated during the early phase of Donald Trump’s second term, despite a regulatory backdrop that many believed would support higher prices. The launch of spot Bitcoin exchange-traded funds in early 2024 was widely expected to draw in new investors and stabilize demand. Instead, the latest sell-off has underscored how sensitive crypto remains to shifts in sentiment and liquidity.

This downturn has coincided with heightened geopolitical tension, broader market volatility, and a more cautious investor mindset. While the wider economy has shown resilience, risk appetite has weakened, and Bitcoin has responded with sharper losses than most traditional assets.

Why Bitcoin Moves More Violently Than Other Assets

Bitcoin’s behavior during periods of stress reflects structural characteristics rather than a temporary anomaly. Unlike equities or bonds, it generates no income or cash flow. Its valuation depends almost entirely on what investors are willing to pay, making price movements heavily sentiment-driven. Research from S&P Global Ratings has previously shown that cryptocurrencies tend to amplify broader market volatility, swinging more aggressively when risk appetite rises or falls.

This relationship is causal, not merely correlational. When liquidity tightens or confidence fades, speculative assets like Bitcoin often experience outsized moves. Some strategists warn that if selling pressure persists, prices could fall significantly further, potentially testing levels well below current prices.

Portfolio Decisions Depend on Purpose, Not Predictions

Financial advisors emphasize that there is no universal answer to whether investors should hold, buy, or sell after a steep decline. The appropriate response depends on how Bitcoin fits into an individual’s broader financial plan and tolerance for volatility. Historically, Bitcoin has moved in pronounced cycles, with dramatic rallies followed by drawdowns of 60% or more. The current decline fits that long-established pattern.

From a portfolio construction perspective, many planners argue that Bitcoin remains a speculative allocation rather than a foundational asset. Advisors who are comfortable with crypto at all tend to recommend limiting exposure to a small percentage of total assets, typically in the low single digits, and only for investors with strong balance sheets and a high tolerance for risk. In that framework, downturns do not redefine Bitcoin’s role but instead reaffirm its uncertainty.

Long-Term Thesis Versus Short-Term Reality

Some investors continue to view Bitcoin as a long-term store-of-value asset, citing its capped supply and independence from governments and central banks. From that perspective, sharp sell-offs are seen as inherent to the asset rather than a refutation of its long-term thesis. The key question for holders is not whether prices have fallen, but whether the underlying reasons they bought Bitcoin in the first place have fundamentally changed.

At the same time, critics point out that without income generation, long-term returns rely solely on future price appreciation and an investor’s ability to withstand prolonged drawdowns. This makes Bitcoin unsuitable as a replacement for traditional building blocks such as diversified equity exposure, bonds, or emergency savings.

The fall below $64,000 is less a definitive buying opportunity or exit signal than a reminder of Bitcoin’s nature. It can enhance returns in favorable cycles, but it can also magnify losses when sentiment turns. For most investors, the episode reinforces a familiar conclusion. Crypto may have a place as a small, high-risk component of a diversified portfolio, but it is not essential, and it should only be held in amounts one can afford to see fluctuate sharply without derailing broader financial goals.

Source: CNBC

Risk Warnings and Disclaimers

Add to Favorites

Recent Searches

Top Searches

Markets

News

Analysis

User

24/7

Economic Calendar

Education

Data

Japan Megabanks Signal Return to JGBs as Yield Outlook Improves Despite Valuation Losses

Shift In Strategy As Yield Environment Changes

Recent Yield Volatility And Market Stabilization

Unrealized Losses Remain A Key Constraint

Duration Strategy And Cautious Re-Entry

Earnings Momentum Supported By Higher Rates

Source: TradingView

Bitcoin Slides as Tech Rout Spreads From Wall Street to Asia

Global Risk Sentiment Turns Cautious

Bitcoin Gives Back Trump-Era Gains

Mixed Performance Across Asian Markets

Wall Street Losses Set the Tone

Commodities And Currencies Reflect Volatility

Source: Bloomberg

Iron Ore Slips Under $100 as Oversupply and Seasonal Weakness Deepen Pressure

Prices Break Key Threshold Amid Prolonged Downtrend

China Demand Softens Ahead of Lunar New Year

Rising Inventories Reinforce Bearish Fundamentals

Supply Growth Adds Structural Pressure

Weather Disruptions Offer Limited Relief

RBI Holds Interest Rates as US Tariff Relief Boosts Outlook

Tariff De-escalation Eases Pressure for Easing

Economic Growth Forecasts Strengthen

Inflation Remains Well Below Target

Rupee Rallies on Improved Trade News

US Issues 'Leave Now' Alert Ahead of Iran Negotiations

Iranian special forces stand guard in Tehran, reflecting the heightened security situation across the country.

High-Stakes Talks Clouded by Uncertainty

Core Disputes Fueling the Standoff

Military Buildup and Internal Pressures

Japan's Economy Likely Rebounded in Q4 2025 on Investment

Forecast Points to 1.6% Annualized GDP Growth

What's Driving the Expected Recovery?

Trade and Monetary Policy Factors

Bitcoin Below $64,000 Forces Investors to Reassess Risk, Not Just Price

A Sharp Decline That Challenges Expectations

Why Bitcoin Moves More Violently Than Other Assets

Portfolio Decisions Depend on Purpose, Not Predictions

Long-Term Thesis Versus Short-Term Reality

Source: CNBC

Risk Disclosure