Bank of Japan’s net income rises in March-September, helped by ETF gains

TOKYO (Reuters) – The Bank of Japan’s net income rose in the first half of fiscal 2018, aided by gains from the central bank’s holding of exchange-traded funds.

Net income for the fiscal half year ended in September was at 827.9 billion yen ($7.27 billion), up 50 percent from 550.2 billion yen in the same period a year earlier, the central bank said on Wednesday.

The central bank’s capital adequacy ratio was 8.30 percent at the end of the first half of fiscal 2018, compared with 8.12 percent a year earlier. The BOJ considers a capital adequacy ratio of 8 percent adequate for maintaining financial soundness.

In the first half of the fiscal year, holdings of exchange-traded funds (ETFs), which are linked to the stock market, rose 37 percent from a year earlier to 21.7 trillion yen.

At the end of September, there were unrealized gains of 7.2 trillion yen, which was 40 percent higher than at the end of March, due to share-price rises in the stock market

The BOJ’s holdings of government debt in the first half of fiscal 2018 expanded 6 percent from the same period a year earlier to reach 462.1 trillion yen.

Unrealized gains from these holdings were 7.3 trillion yen at the end of September, down 32 percent from the end of March

The BOJ’s balance sheet swelled after its adoption in 2013 of a quantitative and qualitative easing program that aimed to accelerate inflation to 2 percent through huge purchases of government bonds and private assets.

Since reverting in 2016 to a policy targeting interest rates, the BOJ has steadily slowed its government bond purchases to half the level it loosely commits to buy each year.

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