MNI BRIEF: Banks Must Be Vigilant Against Tail Risks - BOJ

Financial institutions must be vigilant against tail risks amid global financial tightening, which will cause rises in input costs and an economic slowdown, according to the Bank of Japan’s Financial System Report published Friday.

“Future developments remain highly uncertain as financial and capital markets have been nervous," the report said. "Although the quality of banks’ domestic and foreign loans portfolios has remained high on the whole, some loans entail high credit risks. To ensure the stability of Japan’s financial system, it is necessary to examine the risks of contraction and overheating in the financial system and address potential vulnerabilities appropriately.”

However, the BOJ maintained the baseline assessment that “Japan’s financial system has been sound and resilient,” despite heightened uncertainty over the financial sector in the U.S. and Europe caused.