The Bank of Japan has disclosed that its holdings of Japanese government bonds incurred record unrealized losses in the previous fiscal year, highlighting the severe valuation impact from the central bank's shift toward higher interest rates.

The Japanese central bank announced on Wednesday that the unrealized losses on its Japanese government bond holdings for the fiscal year ending March amounted to 45.441 trillion yen, approximately $285.26 billion.

This loss figure exceeds the 28.625 trillion yen recorded in the prior fiscal year and represents the largest loss for the central bank since comparable data became available.

Bank of Japan officials have long maintained that such losses do not affect monetary policy decisions, as the bank intends to hold these bonds until maturity, meaning these book losses will not be realized.

Since exiting its negative interest rate policy in 2024, the Bank of Japan has been gradually but steadily tightening monetary policy, which has pushed up Japanese government bond yields.

This upward trend has recently accelerated due to market concerns that the Bank of Japan may be falling behind in combating inflation as Middle East conflicts drive up oil prices. If this situation persists, the book losses on its Japanese government bond holdings could deepen.

Another factor driving Japanese government bond yields higher is the government's fiscal stimulus plan, which has heightened market concerns about Japan's debt burden as the central bank reduces its bond purchases.

Prime Minister Sanae Takaichi stated in her latest supplementary budget announcement that the measure would not lead to an increase in bond supply in the market.

The central bank continues to slowly reduce its stock investment portfolio, and its holdings of exchange-traded funds (ETFs) also recorded a record unrealized profit of 57.066 trillion yen in the previous fiscal year.