The Bank of Japan's Finances and Simulations for Profits and Capital

Monetary Affairs Department Policy Infrastructure Division
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Monetary Affairs Department Policy Infrastructure Division: Bank of Japan

No 25-E-1, Bank of Japan Review Series from Bank of Japan

Abstract: The Bank of Japan deems it important to gain a broad understanding of its thinking on central bank finances and monetary policy conduct, and has thus been releasing various communications with regard to how monetary policy conduct affects central bank finances. This paper restates this mechanism and presents simulations for the Bank's future profits and capital by using certain assumptions based on interviews with market participants, taking into account recent changes in monetary policy conduct, including the change of its monetary policy framework and policy interest rate hikes. The results show that, in a scenario in which interest rates are priced in by the market rate, the negative impact on the Bank's finances is limited. Under more severe assumptions, on the other hand, a certain level of financial risk was indicated. The Bank of Japan will continue to ensure its financial soundness in light of the simulation results.

Date: 2025-01-31
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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojrev:rev25e01

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