Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues
IMF Staff Country Reports, May 13, 2024
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Bibliographic details
- Published: May 13, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400274862.002
Overview
- Publication date: May 13, 2024
- This technical note examines financial supervision and regulation of climate-related issues in Japan, focusing on implications for banks and insurers as the country transitions to a net zero economy.
- Japan's transition requires the decarbonization of high-greenhouse gas intensive industrial sectors such as steel.
- The Japanese authorities have been undertaking a number of climate-related activities relevant to banks and insurers.
- Japan is leading the way in the implementation of climate-related disclosures.
Key findings
- Banks and insurers have identified transition and physical risks as potential sources of:
- increasing credit risk
- market risk
- liquidity risk
- operational risk
- reputational risk
- Discussions with Financial Services Agency (FSA) supervisory staff revealed that there is yet to be a systematic approach to addressing climate issues in regular supervisory interactions with banks and insurers.
- The Climate Guidance sets out the FSA’s expectations for financial institutions to support clients’ and investees’ responses to climate change in order to manage financial institutions’ climate-related risks.
Implications and analytical emphasis
- The note emphasizes the need for supervisory frameworks to integrate climate-related considerations into routine supervision of banks and insurers.
- Attention is drawn to the systemic challenge posed by decarbonizing high-emission industrial sectors (example given: steel) for financial sector resilience and exposure profiling.
Policy recommendations (implicit in findings)
- Develop and implement a systematic approach for FSA supervisory interactions to address climate issues with banks and insurers.
- Ensure financial institutions adopt the Climate Guidance expectations to support clients’ and investees’ transition responses, thereby managing climate-related financial risks.
- Continue advancing climate-related disclosures to support transparency and risk assessment across the financial sector.
Metadata and publication identifiers
- Pages: 37
- Volume: 2024
- Issue: 117
- Series: Country Report No. 2024/117
- DOI: https://doi.org/10.5089/9798400274862.002
- Stock No: 1JPNEA2024009
- ISBN: 9798400274862
- ISSN: 1934-7685
International Monetary Fund. "Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues", IMF Staff Country Reports 2024, 117 (2024), May 13, 2024.
Content in this bundle
- Japan’s climate-related risks and policy responses