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BOJ to reserve 20% of FY 2013 surplus to enhance capital base

May 9, 2014

The Bank of Japan asked Finance Minister Taro Aso on Friday to allow it to earmark 20 percent of its fiscal 2013 net surplus for reserves, four times more than the statutory 5 percent, to boost the central bank's capital base.

The first reserve increase in three years is aimed at maintaining the bank's financial health as the BOJ faces the risk of a deterioration in its capital base under the aggressive monetary easing policy it has implemented since April last year.

The margin of increase in reserves would be the largest since current regulations came into effect in 1998.

The reserves are set aside to cover losses that could emerge from assets the BOJ has acquired from private financial institutions.

The BOJ's capital adequacy ratio stood at 7.48 percent at the end of September, below the level required for financial soundness of 8 percent to 12 percent.

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Source: Japan Economic Newswire

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