As demand for loans dropped in Japan, Japanese banks bought record amounts of government debt. Now they are selling the bonds for the first time this year as prices are in free fall.
Lenders cut Japanese government debt holdings to 142.2 trillion yen ($1.7 trillion) as of Oct. 31 from a record high of143.2 trillion yen a month before, according to the Bank of Japan. The banks bought bonds in each of the previous nine months as outstanding loans fell 2.1 percent to 391.9 trillion yen, the lowest since May 2008. Government bonds lost 1.5 percent since Sept. 30, set for the worst quarter in the last seven years, indexes compiled by Bank of America Merrill Lynch show.