The Bank of Japan reported Tuesday a net income of ¥550.2 billion for April-September, in a turnaround from a net loss a year earlier.
The net profit for the fiscal 2017 first half is attributable to the yen’s easing against the dollar and other currencies, the central bank said.
In the same period last year, the BOJ logged red ink of ¥200.2 billion due to losses on its foreign currency-denominated assets amid the yen’s appreciation.
The BOJ also said the central bank’s total assets at the end of September hit a record high ¥513.44 trillion, reflecting its continued massive buying of Japanese government bonds. Of the total, the amount of long-term JGBs exceeded ¥400 trillion.
Interest income from the JGB holdings is believed to have fallen short of the year-before level of ¥628.4 billion, due to purchases from financial institutions at relatively high costs and falling investment returns.
Meanwhile, the BOJ set aside ¥200 billion to ¥300 billion in loss reserves in preparation for its exit from the current unconventional easing policy sometime in the future, which could force the bank to incur trillions of yen of losses. In fiscal 2016, the BOJ began to substantially increase the reserves, which exceeded ¥3 trillion as of the end of September.
In the past several years, the bank has carried out massive monetary stimulus to achieve its 2 percent inflation goal.
BOJ Policy Board member Goshi Kataoka said in a recent interview that the bank should pursue the policy even further.
Kataoka, who joined the Policy Board in July, stressed that the BOJ is at risk of losing public confidence in the effectiveness of its policy, having delayed the timing for achieving the goal six times since 2013.
When the board, led by Gov. Haruhiko Kuroda, voted at its October policy meeting to maintain easing measures to keep interest rates low by affecting the yield curve, Kataoka was the lone dissenter, calling for a focus on longer-term rates and the inclusion of a pledge to ease further if domestic factors kept prices from rising.
Including the pledge would serve to “strengthen confidence toward achievement of the (inflation) target” even if the timeline has to be pushed further back, Kataoka said Friday in his first news interview since joining the decision-making body.
“I cannot help but think it will be difficult” to achieve the target by the BOJ’s current projection of around fiscal 2019, he said.
Despite Japan’s strong corporate earnings and tight labor market, inflation has yet to gain significant momentum. Core consumer prices, excluding volatile fresh food prices, have risen slowly but remain well below the target, with a 0.7 percent year-on-year increase in September.
If the economy, which has been propelled by robust exports, were to suddenly weaken, deflation could rear its head again, Kataoka said. “Even if the economy is strong, additional easing measures should be adopted” to prevent such a scenario.