Norinchukin Bank’s Crisis Signals Fiat Currency System Disaster for Financial Systems Worldwide
In This Article:
- Norinchukin Bank’s $63 Billion Bond Liquidation
- Japanese Banks Facing Catastrophic Unrealized Losses
- Dire Implications for US and European Financial Systems
- Unavoidable Consequences for the Global Economy
The fiat financial is collapsing step by step as Norinchukin Bank, the 5th largest bank in the world’s 5rd largest eoncomy, plans to sell $63 billion US and European sovereign bonds.
Also Read: Currency System Failure: The Japanese Yen Will be the First to Collapse
This drastic move continues to highlight the severe financial distress within Japanese banks and foreshadows imminent currency economic disaster.
Norinchukin Bank’s $63 Billion Bond Liquidation
Norinchukin Bank’s decision to liquidate nearly 10 trillion yen ($63 billion) in US and European sovereign bonds represents a desperate attempt to stem losses from failed interest rate bets.
The bank, with a securities portfolio of almost 60 trillion yen, will complete these sales by the end of March. This massive liquidation represents about a sixth of its global portfolio and guarantees a net loss of 1.5 trillion yen for the current fiscal year, tripling the previous estimate.
“We will reduce sovereign interest rate risk and diversify into assets that take on corporate and individual credit risk,” stated Chief Executive Officer Kazuto Oku.
Japanese Banks Facing Catastrophic Unrealized Losses
Norinchukin Bank’s crisis is not an isolated incident. Japanese banks grapple with catastrophic unrealized losses on their bond portfolios.
As of March, Norinchukin reported 2.19 trillion yen in unrealized losses, with 31.3 trillion yen in bond holdings accounting for 56% of its overall portfolio. This mirrors the struggles of US banks, which had $516.5 billion in unrealized losses by the end of March.
Bank of America alone reported over $100 billion in such losses, exposing a global issue of low-yield bond investments during prolonged periods of low interest rates.
Dire Implications for US and European Financial Systems
The challenges faced by Japanese banks offer a tell-tale sign of impending crises in the US and European fiat financial systems.
Both regions have heavily invested in low-yield bonds, and as interest rates rise, the value of these bonds plummets, creating massive unrealized losses.
Also Read: Why I’m Incessant about the Japanese Yen Crisis these Days
The strategies employed by Japanese banks to try and stem these losses, including asset diversification and capital raising from members, will soon become necessary for their Western counterparts.
“This seems a failure of risk oversight rather than a systemic story of Japanese holders liquidating,” remarked Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investments.
However, the aggressive buying of US investment-grade debt by other Japanese banks contrasts sharply with Norinchukin’s sell-off, revealing varied approaches to managing financial risk.
Also Read: UST Enjoys Record High Demand for 20 Year Bonds from Foreign Investors
Unavoidable Consequences for the Global Economy
The unfolding financial distress in Japan guarantees far-reaching consequences. The collapse of the Japanese yen will trigger a domino effect in global markets. Investors and policymakers worldwide must closely watch Japan’s response to these challenges, as it dictates the future course of similar crises elsewhere.
This situation underscores the interconnectedness of the global fiat currency financial system. If one major economy falls, so do the rest in a domino effect.
The Bottom Line
Norinchukin Bank’s massive bond liquidation and the broader financial distress in Japan underscore the vulnerabilities within global financial systems.
As Japanese banks grapple with catastrophic unrealized losses, the collapse of the yen takes center stage on the global economic and currency stage.
Supporting article: https://asia.nikkei.com/Business/Finance/Japan-s-Norinchukin-Bank-to-sell-63bn-of-U.S.-and-European-bonds
