Smart Finance APP noticed that Mizuho Financial Group is preparing, if investors' predictions of a soft landing for the USA economy prove to be wrong, short-term market turmoil may occur. The group will stock up on easy-to-sell assets such as US bonds.

Kenya Koshimizu, Co-Head of Global Markets at the bank, stated in an interview last week that market participants seem overly confident, believing that US policy makers can contain inflation without causing a recession.

Koshimizu mentioned that to mitigate the impact of any shocks, including a potential US economic recession, Mizuho has been buying US Treasuries, US government agency bonds, and other assets that are easier to sell or hedge against price drops. He mentioned that the bank has divested mortgage-backed bonds and other credit products from its $280 billion securities portfolio.

"Market participants' expectations seem heavily focused on a soft landing," Koshimizu said. "If anyhard landingSigns of this, or a further acceleration of the economy, will make the market fragile.

After the Bank of Japan began raising interest rates this year, market participants are closely watching how Mizuho and other Japanese banks will manage a total of 1.8 trillion USD investment portfolios. There are speculations that Japanese investors will sell a portion of the 4.4 trillion USD overseas assets and bring back these funds domestically, which has disrupted global markets in the past.

"We need to be flexible. Our current strategy is to focus on highly liquid products," he added, mentioning that the bank is also buying ETFs for Japanese and overseas stocks.

"Even if Japanese banks re-enter the Japanese government bond market, it is "highly unlikely" that they will repatriate large amounts of funds domestically, as they already have sufficient cash in the domestic market.

"Our reserves are sufficient," he referred to yen funds. Compared to selling overseas assets, "we can use the yen at hand," Koshimizu said.

Despite potential market fluctuations in the future, Mizuho remains bullish on Japan's long-term prospects, with Kosimizu expecting the Bank of Japan to eventually raise the policy rate from the current 0.25% to around 2%.

He stated that with the recovery of manufacturing activities and the end of deflation, "Japanese assets may be favored." "Despite short-term fluctuations, Japanese stocks are a very good investment in the medium to long term."

In the Japanese government bond market, as the Bank of Japan begins to reduce its large-scale bond purchase program, it is expected that Japanese banks will replace the Bank of Japan as the main buyers. In recent years, the proportion of Japanese government bonds held by private banks as a percentage of all outstanding promissory notes has decreased from around 40% before the Bank of Japan's aggressive easing policy in early 2013 to around 10%, as they have avoided negligible or even negative interest rates.

As of the end of June, Mizuho Financial held Japanese government bonds worth 13.5 trillion yen (equivalent to 91 billion US dollars), but most of them are short-term discount bills. It also holds foreign bonds worth 17.2 trillion yen, with a significant portion being American securities.

Koshimizu stated that it is too early to start comprehensive purchases of Japanese government bonds now. He pointed out that the yield on the 10-year Japanese bonds has not yet reached a "fair value," even though it reached a high of 1.1% earlier this year in 13 years.

Koshimizu mentioned that if the economic situation in the USA deteriorates more than expected and yields further decline, Mizuho may "strategically enter" the Japanese government bond market to gain trading profits.

He is not very concerned that young Japanese government bond traders lack experience in dealing with rising Japanese interest rates. "We rotate our employees between yen exchange rates and other currencies. Foreign rates go up and down." "I think they can adapt."