MNI BRIEF: BOJ FSR Warns Of High Rates Impact On Banks

Several banks have high interest rate risk, which will require careful management, according to the Bank of Japan’s Financial System Report on Thursday, which warned further vigilance against tail risks was needed.

“As shown in the analysis in the previous Report in April, there are many banks whose core profitability has become lower than in the past, and it is possible that more banks would require a certain amount of time to restore their capital," the report said.

As for the impact of volatile financial markets in early August, the FSR said that stock prices in Japan declined further due to the decline in U.S. equity markets, the yen’s appreciation, and follow-on selling by foreign investors.

“Prices of risky assets have subsequently risen. However, tightening of global financial conditions continues to warrant attention,” the FSR warned.

Japanese banks have sufficient capital and stable funding to withstand various stress events equivalent to the global financial crisis, the FSR noted.