Skip to main content

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

日本語

January 31, 2025
Policy Infrastructure Division
Monetary Affairs Department

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.

Notice

The Bank of Japan Review Series is published by the Bank to explain recent economic and financial topics for a wide range of readers. This report, 2025-E-1, is a translation of the Japanese original, 2024-J-15, published in December 2024.

If you have any comments or questions, please contact Policy Infrastructure Division, Monetary Affairs Department (E-mail : post.mad9@boj.or.jp).