Japan: Financial Sector Assessment Program-Financial System Stability Assessment
IMF Staff Country Reports, May 13, 2024
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- Japan: Financial Sector Assessment Program-Financial System Stability Assessment
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Bibliographic details
- Published: May 13, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400273384.002
Overview
- This paper presents Financial System Stability Assessment of Japan Financial Sector Assessment Program.
- Japan’s large and globally well-integrated financial system has remained resilient through a series of shocks, including the coronavirus disease 2019 pandemic, aided by strong policy support and improved policy frameworks.
- The evolving and challenging risk environment underscores the need to fill remaining gaps in the financial sector policy frameworks.
Key findings
- The financial system is broadly resilient to a range of adverse macrofinancial shocks, though there are some areas of susceptibility.
- Banks and insurers are, in aggregate, well able to maintain their solvency position under a hypothetical adverse scenario comprising an increase in foreign and domestic interest rates and a decline in economic growth and asset prices.
- Staffing resources need to be increased significantly to enhance the supervision and resolution of financial institutions.
Risk assessment and stress-test results
- Hypothetical adverse scenario components:
- an increase in foreign and domestic interest rates
- a decline in economic growth
- a decline in asset prices
- Aggregate solvency outcome:
- Banks and insurers are, in aggregate, well able to maintain their solvency position under the above scenario.
- Keywords and analytical focus areas: climate transition risk analysis result, core inflation, economic value, stress test result.
Policy recommendations and supervisory actions
- The supervisory agency should continue to develop its risk-based approach to banking supervision.
- The supervisory agency should be provided with the power to set individual bank capital ratios above the minimum in response to a bank’s risk profile.
- Increase staffing resources significantly to enhance supervision and resolution of financial institutions.
- Fill remaining gaps in the financial sector policy frameworks to address evolving risks.
Content in this bundle
- 1jpnea2024001