A 28 percent rally in the Nikkei 225 Stock Average since the April 1 start of Japan’s financial year may give banks a chance to sell stocks at a profit. Mitsubishi UFJ Financial Group Inc., the nation’s biggest bank, said last month it was sitting on 500.7 billion yen of unrealized gains on its share portfolio after booking 409 billion yen of losses last year.

“The large banks all have huge cross shareholdings in equities and they don’t need these things,” said Daniel Tabbush, a Bangkok-based analyst at

CLSA Asia-Pacific Markets. “The problem is there is too much volatility in the earnings of the Japanese banks and capital with the market going up and down.”

The government passed legislation in March allowing it to buy as much as 20 trillion yen of shares held by the lenders to boost their capital and bolster a stock market. The Banks’ Shareholders Purchase Corporation purchased a total of 137.9 billion yen in stocks by the end of July, equivalent to 6.9 percent of the fund’s budget to March 2012.

Source: Bloomberg