BOJ misread US subprime risks, notes from '07 show

Jul 31, 2017 | News On Japan

Jul 31, 2017 (NHK) - The Bank of Japan has released minutes of its board meetings during the first 6 months of 2007. They show policymakers were not fully aware of the risks looming because of the subprime mortgage issue in the US. The resulting collapse of the investment bank Lehman Brothers led to a global financial crisis the following year.

The BOJ governor at the time, Toshihiko Fukui, expressed concern about price adjustments in the US housing market at the bank's February meeting. But he said the impact was unclear.

The then deputy governor said the following month that investors could suffer major losses buying securities backed by risky US housing loans.

But minutes of the June meeting show policymakers weren't aware of how critical the situation was.

Some are quoted as saying that attention should be paid to the issue of subprime mortgage-backed securities, but that their impact on the financial system would likely be limited.

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