The Bank of Japan said Wednesday that unrealized losses on its holdings of Japanese government bonds widened to a record ¥13.66 trillion at the end of September from ¥10.5 trillion a year earlier.

JGB prices fell after the central bank ended its negative interest rate policy in March and raised interest rates in July. The benchmark 10-year JGB yield rose from below 0.75% at the end of March to around 0.85% at the end of September. Bond yields move in the opposite direction to prices.

The valuation losses are not reflected in the BOJ's financial statements as the central bank is supposed to hold JGBs to maturity.

BOJ Gov. Kazuo Ueda has said that growing latent losses "would not hinder (the central bank's) ability to manage policy."

Still, there are fears that a possible rise in concerns about the BOJ's financial position could affect bond and currency markets.

The BOJ policy shift also led to an increase in the central bank's interest payments on current account deposits from private financial institutions, which surged to ¥392.2 billion from ¥92.0 billion.

As the BOJ plans to continue raising interest rates, such interest payments could increase further, potentially pushing the central bank into a deficit.

Meanwhile, the BOJ's holdings of long-term JGBs totaled ¥582.99 trillion at the end of September, down 0.3% from a year before, the first decrease in 16 years.

In July, the BOJ decided on a plan to gradually reduce its bond purchases, which had been promoted as part of its massive easing campaign. As a result, its JGB holdings are expected to continue to shrink.

The BOJ's holdings of exchange-traded funds, which it also purchased as part of its easing policy, had latent gains of ¥33.07 trillion, down from ¥37.31 trillion at the end of March.

The central bank's surplus funds, equivalent to the net profits of private companies, also decreased to ¥1.84 trillion from ¥1.93 trillion.