Zhitong Finance learned that the Bank of Japan said on Thursday that the Bank of Japan has sufficient capital base, but it needs to be wary of tail risks, including developments in global financial markets and geopolitical risks. The Bank of Japan said in its financial system report that the Bank of Japan's capital and financing base is sufficient to withstand various stressful events equivalent to the global financial crisis. However, it stated: “It is still necessary to be alert to tail risks, including developments in global financial markets and geopolitical risks.”

The Bank of Japan ended negative interest rates in March and raised short-term interest rates further to 0.25% in July, marking a landmark step in the Bank of Japan's decade-long stimulus plan aimed at boosting inflation. The report also points out that many banks have high interest rate risks associated with securities investments, and urges careful management of interest rate risks.

The report said that although the number of corporate bankruptcies in Japan continues to rise, banks' credit cost ratios are still low, thanks to the accumulation of provisions to prevent loan losses during the pandemic. But it also pointed out that due to rising prices and labor shortages, some businesses have gone bankrupt. The Bank of Japan's report said, “As price transmission gradually spreads, the overall credit cost ratio is unlikely to rise sharply, but future developments deserve close attention.”