{
  "title": "Japan: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis and Stress Testing the Financial Sector",
  "publication": "IMF Staff Country Reports, September 18, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2017/09/18/japan-financial-sector-assessment-program-technical-note-systemic-risk-analysis-and-stress-45263",
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  "summary": "This Technical Note discusses the results of stress testing of the financial sector in Japan. The Japanese financial system appears generally resilient to short-term risks, but pockets of vulnerability exist.",
  "publishDate": "2017-09-18",
  "series": "IMF Staff Country Reports",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- The Technical Note discusses the results of stress testing of the financial sector in Japan.\n- The Japanese financial system appears generally resilient to short-term risks, but pockets of vulnerability exist.\n- Overall, banks appear to have sufficient capital and liquidity buffers to cope with a scenario of severe recession owing to disruptions in global trade, and accompanied by a sharp increase in interest rates and risk premiums, and a decline in equity prices.\n- Spillovers within the system also appear to be limited.\n- Resilience is not equal among all institutions included in the analysis; some life insurance companies and regional banks may need to strengthen their capital buffers."
    },
    {
      "heading": "Stress test scenarios and outcomes",
      "content": "- Scenario described: severe recession owing to disruptions in global trade, accompanied by a sharp increase in interest rates and risk premiums, and a decline in equity prices.\n- Outcome: banks generally maintain sufficient capital and liquidity buffers under the scenario.\n- Outcome: system-wide spillovers are assessed as limited."
    },
    {
      "heading": "Vulnerabilities and institutions at risk",
      "content": "- Identified pockets of vulnerability include:\n  - Some life insurance companies.\n  - Some regional banks.\n- Recommended focus: strengthening capital buffers for institutions identified as vulnerable."
    },
    {
      "heading": "Subject coverage and keywords",
      "content": "- Subjects: Banking; Financial institutions; Financial sector policy and analysis; Insurance companies; Solvency; Solvency stress testing; Stocks; Stress testing.\n- Keywords include: Asia and Pacific; balance sheet; BoJ facilities; cash flow; City bank; CR; credit risk; financial system; funding shock; Global; hurdle rate; IMF staff calculation; Insurance companies; investment trust; ISCR; market liquidity risk; market liquidity shock; market share; return on assets; Solvency; Solvency stress testing; Stocks; stress test; Stress testing; U.S. dollar; U.S. dollar-liquidity analysis.\n\n---\n\n Content in this bundle\n\n- Country Report\n  - Country Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/cr/issues/2017/09/18/japan-financial-sector-assessment-program-technical-note-systemic-risk-analysis-and-stress-45263"
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    "Published: September 18, 2017",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781484319819.002",
    "The Technical Note discusses the results of stress testing of the financial sector in Japan.",
    "The Japanese financial system appears generally resilient to short-term risks, but pockets of vulnerability exist.",
    "Overall, banks appear to have sufficient capital and liquidity buffers to cope with a scenario of severe recession owing to disruptions in global trade, and accompanied by a sharp increase in interest rates and risk premiums, and a decline in equity prices.",
    "Spillovers within the system also appear to be limited.",
    "Resilience is not equal among all institutions included in the analysis; some life insurance companies and regional banks may need to strengthen their capital buffers.",
    "Scenario described: severe recession owing to disruptions in global trade, accompanied by a sharp increase in interest rates and risk premiums, and a decline in equity prices.",
    "Outcome: banks generally maintain sufficient capital and liquidity buffers under the scenario.",
    "Outcome: system-wide spillovers are assessed as limited.",
    "Identified pockets of vulnerability include:",
    "Recommended focus: strengthening capital buffers for institutions identified as vulnerable.",
    "Subjects: Banking; Financial institutions; Financial sector policy and analysis; Insurance companies; Solvency; Solvency stress testing; Stocks; Stress testing.",
    "Keywords include: Asia and Pacific; balance sheet; BoJ facilities; cash flow; City bank; CR; credit risk; financial system; funding shock; Global; hurdle rate; IMF staff calculation; Insurance companies; investment trust; ISCR; market liquidity risk; market liquidity shock; market share; return on assets; Solvency; Solvency stress testing; Stocks; stress test; Stress testing; U.S. dollar; U.S. dollar-liquidity analysis.",
    "**Country Report**"
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