Mizuho ends illiquid assets, shortens maturity

Mizuho Financial Group Inc. is discontinuing illiquid assets and shorterening the average maturity of its Japanese and other sovereign bond holdings so it spositioned to deploy money after expected policy changes over the next 12 months.

The third-largest bank in Japan is curving up with its investments, Kenya Koshimizu, the co-head of Mizuho's global markets company, said in an interview. He anticipates central bank actions in the US and Japan to spark big market moves, and wants to be prepared.

We should be ready for any eventuality, said Kiyoshi Koshimizu, who oversees Mizuho's securities portfolio. We don't build big positions in anything, he said. He expects the Bank of Japan to change its ultra-easy policy within a year or so, given the country's economic strength. He said that the end of aggressive rate hikes by the Federal ReserveFederal Reserve is well within the realm of possibility, so we will wait to see its timing. As of March 31, Mizuho's holdings totaled about 37 trillion yen $264 billion, according to an investor presentation. The figure includes investments not managed by Koshimizu's global markets team and securities held for other purposes.

Japan's banks were stung by the Fed's aggressive rate hikes last year, causing unrealized losses on their foreign bond holdings to balloon. It realized some of these losses in the latest quarter to clean up their balance sheets ahead of the new fiscal year that began in April.

In 2019, Mizuho said it rebuilt its portfolio after it realized losses on its foreign bond holdings and had to slash its net income forecast.

Koshimizu warns that the biggest risk facing the market today is extreme uncertainty over how successful the Fed will be in taming inflation without causing a severe slowdown in the US economy. Data coming out in the world s biggest economy between July and September will be important in determining the course of the Fed s actions, he said.

In Japan, he sees the central bank likely to raise the cap on its yield curve control program or eliminate it altogether, provided there isn t any major shocks to the financial system like a severe US recession. He said such action could be followed by the discontinuation of the negative interest rate policy.

The momentum, or shall I say, the dynamism of the Japanese economy and prices has started to change, he said. It's possible that we can expect the monetary policy to change faster or later. Koshimizu said Mizuho is ready to bet again once it s clear where the markets are heading. There are chances that the market situations will change significantly, he said. We will put our positions in that direction when such trends emerge. None of Jazz Struggles on Streaming, But Vinyl Sales Give the Genre Hope.