IMF Staff Country Reports

Japan: Financial Sector Assessment Program-Financial System Stability Assessment

Publication Date:

May 13, 2024

Electronic Access:

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Summary:

Japan’s large and globally well-integrated financial system has remained resilient through a series of shocks, including the COVID-19 pandemic, aided by strong policy support and improved policy frameworks since the 2017 Financial Sector Assessment Program (FSAP). The financial system is, however, at a critical juncture amid an evolving macroeconomic environment. After years of deflationary concerns and ultralow interest rates, sustained inflationary pressures have emerged, leading the Bank of Japan to end its negative interest rate policy and yield curve control. Key risks to macrofinancial stability at present stem from the sizable security holdings of financial institutions under mark-to-market accounting, some banks’ notable foreign currency (FX) exposures, and signs of overheating in parts of the real estate markets. These challenges come atop several structural transformations stemming from climate change, rapid digitalization, and an aging population.

Series:

Country Report No. 2024/109

Subject:

Financial institutions Financial Sector Assessment Program Financial sector policy and analysis Financial sector stability Financial stability assessment Insurance companies International organization Macroprudential policy Monetary policy

Frequency:

regular