Are Japanese banks becoming more insulated against losses that could emerge from a sudden rise in interest rates?

Are Japanese banks becoming more insulated against losses that could emerge from a sudden rise in interest rates?

A Bank of Japan report showed Wednesday that:

• Based on their portfolios as of December, the BOJ estimates that the country’s major and regional banks could suffer a combined Y5.6 trillion ($54.5 billion) in losses if interest rates rose 1%
• That’s lower than the Y6.0 trillion in potential losses they faced as of June last year
• Also lower than the peak of Y6.9 trillion in possible losses estimated for the end of 2012
• A 2% increase in rates would lift the potential losses to Y10 trillion
• A 3% increase could result in Y14.4 trillion in losses, the BOJ projected

A BOJ official said that since the BOJ launched its unprecedented easing a year ago, commercial banks, particularly major ones, have been wary of accumulating yen-denominated bonds partly on fears of losses when interest rates start to go up.

There’s more detail at the Wall Street Journal: BOJ Beat: Banks Becoming More Insulated Against Rate Jump (ungated article.)