BOJ: Financial Sector Remains Well Capitalized

  • According to the BOJ, the financial sector has generally remained well-capitalized despite the on-going impact of the COVID-19 pandemic and its dampening effect on the earning capacity of financial institutions.
  • Entities continue to hold capital positions well in excess of the prudential minimum and there has been a broad shift away from risky investments towards less risky assets.
  • Risk exposure indicators for deposit-taking institutions (DTIs) and Security Dealers (SDs) showed mixed results. In addition to a deterioration in foreign exchange risk across both sectors, there was some weakening in the household credit risk measure for the DTIs. There was, however, an improvement in interest rate risk exposure of the sector.
  • Composite indicators of macro-financial conditions deteriorated. However, the micro-based measure of financial stability was broadly stable and continued to reflect a healthy banking system.

(Source: BOJ)