TOKYO (MNI) - The Bank of Japan said Friday that it posted a net loss of Y12.1 billion in the April-September period, compared with a net profit of Y456.4 billion it marked in the first half of fiscal 2008.

The BOJ has posted a net loss in a half-year period for the first time since the first half of fiscal 2003, when it lost Y112.6 billion.

The latest net loss was mainly caused by losses linked to foreign exchange fluctuations, which came to Y303.8 billion in April-September 2009, compared with a surplus of Y100.6 billion a year earlier.

This year it was due to the yen's rise against other currencies. The dollar traded at Y89.77 at the end of September, compared with Y106.36 at the end of September 2008.

In the first half of fiscal 2009 to Sept. 30, gains from stock holdings by the BOJ fell to Y6.7 billion from Y93.5 billion a year earlier.

The sharp drop was due to declines in dividends and proceeds from selling its stock holdings. The BOJ stopped selling its share holdings in October to help stabilize the stock market.

The BOJ said it also posted a pretax loss of Y10.4 billion, compared with a profit of Y568.5 billion a year earlier. It was its first pretax loss since the first half of fiscal 2003, when it recorded a loss of Y195.8 billion.

In the wake of low interest rates in Japan and elsewhere, the rate of return for the BOJ's fund investment fell to 0.755% in the first half of fiscal 2009 from 0.996% in the same period of 2008. It was the lowest level since the first half of fiscal 2006, when it was at 0.646%.

However, the assets held by the BOJ at the end of September totaled Y116.32 trillion, up Y3.8 trillion, or 3.4%, from Y112.53 trillion a year earlier.

The BOJ's assets hit a record high of Y150.5 trillion at the end of March 2005, thanks to its quantitative easing policy under which the bank flooded the money market with excess cash and raised the level of reserves commercial banks were required to maintain at the central bank.

The BOJ's capital adequacy ratio at the end of September was 7.47%, down from 7.54% from a year earlier but unchanged from the level at the end of March.

That ratio, however, is still lower than the level the BOJ desires.

The central bank has said that it regards as acceptable a fluctuation in its own capital adequacy ratio of 2 percentage points above or below 10%.

The outstanding balance of long-term Japanese government bonds held by the BOJ at the end of September totaled Y46.25 trillion, up from Y42.26 trillion a year earlier.

Meanwhile, the balance of banknote issues was Y75.92 trillion at the end of September, up 0.6% from Y75.49 trillion at end-September 2008.

The BOJ is currently buying Y1.8 trillion of JGBs outright monthly.

The BOJ has set its own rule that the balance of JGBs it holds should not exceed the balance of banknotes in circulation. The rule is designed to maintain a healthy balance sheet at the central bank.

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