BOJ’s Financial Stability Report: Low rates, structural factors to hurt banks even after pandemic subsides

Dhwani Mehta FXStreet

Low-interest rates and structural factors will continue exerting downward pressure on financial institutions' profits even after the coronavirus pandemic impact subsides, the Bank of Japan (BOJ) said in its semi-annual report released on Tuesday.

The BOJ’s Financial Stability Report (FSR) is published after conducting a review of the country's banking system.

Key highlights

Japan's financial system stable as a whole though pandemic continue to inflict big impact on the economy.

Investors' risk sentiment improving, fund inflows into stock market, emerging economies surging.

Japan's financial system is resilient to shocks but rising credit costs, losses banks could incur to its securities holdings, potential disruption to banks' dollar funding are among risks.

BOJ will actively support financial institutions' efforts to respond to climate change risks, digitalisation.

USD/JPY reaction

USD/JPY is seeing fresh signs of life from a fresh uptick in the US Treasury yields, which offsets the negative impact of the falling dollar on the spot.

The spot rises 0.13% to daily highs of 108.31, having hit seven-week lows of 107.97 earlier in the Asian session.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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