Top Japanese Banks Plan to Rebuild JGB Positions Amid Yen-Denominated Losses and Rate Hikes

Feb 6, 2026 — Japan’s largest banks, Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMFG), are planning to gradually increase holdings of Japanese government bonds (JGBs) despite growing unrealized yen-denominated bond portfolio losses. Higher yields, signaling a potential peak in the yield curve, are expected to provide better returns. MUFG recorded 200 billion yen ($1.3 billion) in unrealized bond losses at year-end, up from 40 billion yen in March, while SMFG’s losses more than doubled to 98 billion yen over the nine months to December. The banks are expected to avoid longer-duration bonds until yields stabilize following the Bank of Japan’s three rate hikes since March 2024, when the policy rate stood at 0.75%. Analysts note that with the 10-year JGB yield at 2.195% and expectations for it to reach 2.5%, the timing is favorable for cautious JGB purchases. Goldman Sachs raised 2028 net profit forecasts for MUFG, SMFG, and Mizuho Financial Group by 20%, 11%, and 21%, respectively, reflecting higher yields and a weaker yen.