TOKYO (MNI) – The Bank of Japan said Friday that it posted Y366.5
billion in operating profit, or operating income minus operation
expenses, last fiscal year to March 31, down 16.5% from Y439.0 billion a
year earlier.

The drop in the profit was due mainly to lower interest payments
from loans amid continued very low interest rates in Japan as well as a
fall in foreign exchange related gains.

This followed a 36.1% drop in operating profit at the BOJ in fiscal
2008, which was caused by a decline in capital gains stemming from sales
of stocks.

Meanwhile, the BOJ posted a net income of Y367.1 billion for fiscal
2009, up from Y300.2 billion a year earlier. It marked the first on-year
rise in net income in three years.

The BOJ shifted Y18.3 billion, or 5% of its net income, into legal
reserves that form the core of its capital base.

The BOJ’s profits from sales of stocks fell to Y2.4 billion in
fiscal 2009 from Y79.7 billion in fiscal 2008.

Interests on Japanese government bonds held by the BOJ during the
fiscal year totaled Y599.5 billion, down from Y648.3 billion.

The average rate of returns from money market operations in fiscal
2009 was 0.709%, down from 0.964%.

The assets held by the BOJ at the end of March totaled Y121.8
trillion, down 1.7% from Y123.89 trillion a year earlier and marking the
first on-year drop in three years.

The drop resulted from the termination of the central bank’s dollar
funding operations, a temporary, unconventional measure aimed at
alleviating market fears about a global liquidity shortage.

Later the BOJ on May 10 decided to resume conducting dollar
fund-providing operations as part of global efforts to calm jitters over
liquidity problems in Europe in the wake of the Greek debt crisis.

The BOJ’s foreign currency-denominated assets fell sharply to Y5.02
trillion at the end of March from Y10.86 trillion a year earlier.

The BOJ’s assets hit a record high of Y150.5 trillion at the end of
March 2005 on the back of its quantitative easing policy.

The BOJ’s capital adequacy ratio at the end of March 2010 was
7.47%, unchanged from a year earlier.

That ratio is still lower than the level the BOJ desires.

The central bank has said that it regards as acceptable a
fluctuation in its own capital adequacy ratio of 2 percentage points
above or below 10%.

The outstanding balance of long-term government bonds held by the
BOJ at the end of March totaled Y50.21 trillion, up from Y42.66 trillion
from a year earlier.

Meanwhile, the balance of banknote issues was Y77.35 trillion at
the end of March, up from Y76.90 trillion at the end of March 2009.

The BOJ has set its own rule that the balance of its JGB holdings
should not exceed the balance of banknotes in circulation. The rule is
designed to keep discipline.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **