Govt Panel Asks Norinchukin to Hire Investment Experts from Outside; Proposal Comes in Response to Heavy Losses on Foreign Bonds

The Yomiuri Shimbun

17:00 JST, January 29, 2025

A panel of experts working for the Agriculture, Forestry and Fisheries Ministry urged the Norinchukin Bank to bring in more investment experts from outside the bank, one of the proposals to reform the bank’s management included in a recent report compiled by the panel.

The panel made this proposal because the Norinchukin Bank has suffered heavy losses from investments in foreign bonds.

To prevent further such losses from occurring, the report calls for the law to be revised to allow talented human resources from outside of the bank to be appointed to its board of directors; it also urges the bank to shift to investment tactics which will let them disperse risk.

Institutional investor

On Jan. 28, panel chairperson Yusuke Kawamura, who is also the representative director of the Institute of Glocal Policy Research, handed a copy of the report to Agriculture, Forestry and Fisheries Minister Taku Eto.

The minister said, “This has brought shame on the name of Norinchukin. I want to firmly instruct the Norinchukin Bank to do a better job based on the analysis in the report.”

The Norinchukin Bank collects funds from farmers, forestry businesses and people in fisheries industries via Japan Agriculture Co-operative (JA) group entities and other financial institutions under its umbrella.

The bank invests the money mainly in stocks and bonds in Japan and abroad. As of the end of March 2024, the volume of the bank’s investments in the markets was ¥56 trillion.

Thus the Norinchukin Bank is seen a major Japanese institutional investor, on par with the country’s major life insurance companies.

Foreign bonds account for about 40% of the Norinchukin Bank’s assets.

Since 2022, the bank’s unrealized losses have ballooned because interest rates in the United States and European countries have risen, driving bond prices down.

As of the end of March 2024, the bank’s unrealized loss from investments in bonds had increased to ¥2.1923 trillion, 6.6-fold what it had been two years before.

The bank predicts its net losses as of the end of March 2025 will be around ¥1.5 trillion, but it is possible that the amount may rise to over ¥2 trillion.

Board directors all promoted internally

The Norinchukin Bank’s board of directors, who are responsible for making decisions about the bank’s business operations now comprises seven members. All seven were promoted to their board positions from inside the bank.

Of the seven, only two are from business departments that worked with market investments.

The reason why all of the board members are bank insiders is that the Norinchukin Bank Law prohibits its board directors from concurrently having other jobs.

The panel’s report asks the bank to add more people with market investment experience to the board of directors and asks the agriculture ministry to revise the law so that experts from outside the bank can be appointed to the board and other important posts.

The report calls on them to thereby reduce the investment risk they face which could result in huge losses.

By allowing members of the bank’s board to have other jobs concurrently, the report aims to bring in more externally hired members with expert knowledge of market investment.

Regarding the bank’s operational structure, the report asks the Norinchukin Bank to shift away from its current investment policy, which is heavily reliant on bonds, to one with more diverse sources of revenue, making the risks it faces more diffuse.

It also indicates that the bank should increase its loans to farmers and food producers, as demand for funding for large-scale farmers is growing and food producers are demanding more money for capital investments.

Compared with Japan Finance Corporation, a government-owned public corporation, the Norinchukin Bank’s loans extended to agricultural sectors for that purpose have seen sluggish growth.

After the panel’s meeting, Kawamura told reporters, “It will be no good if the bank spends six months or a year just analyzing this. We want them to deal with these issues in a concrete, visible way as soon as possible.”

He suggested that the panel could reconvene if they deem it necessary

According to the ministry, Norinchukin Bank President Kazuto Oku, who attended the panel meeting as an observer, remarked, “We will sincerely take into account what the report says and seriously consider what we need to do.”