Japan’s leading agricultural bank, Norinchukin, is planning a complete overhaul of its investment strategy after huge losses on its foreign portfolio.
Unlike Mitsubishi UFJ Financial Group and other major mainstream banks, Norinchukin relies mainly on its securities portfolio worth about ¥60 trillion ($384 billion) to generate profits. Its lending operations are much smaller than those of its rivals and there are no investment banking operations. However, the pressure to make money is no less urgent than for its listed peers, as it must continue to generate profits for the agricultural cooperatives that own them.
That meant going abroad to escape Japan’s negative interest rate environment. The company poured money into U.S. Treasuries but was saddled with losses when Fed tightening led to higher foreign currency borrowing costs. Norinchukin had not expected US interest rates to remain high for so long.
