BOJ sees ‘sound and resilient’ monetary system regardless of some jitters By Reuters



© Reuters. FILE PHOTO: Folks stroll in entrance of the financial institution of Japan constructing in Tokyo, Japan, April 7, 2023. REUTERS/Androniki Christodoulou

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s monetary system has remained “sound and resilient” regardless of heightened monetary sector jitters within the West stemming from U.S. financial institution failures in March, the Financial institution of Japan stated in its semi-annual monetary system report.

Nonetheless, the central financial institution additionally stated that vigilance in opposition to tail dangers had been warranted.

“Future developments stay extremely unsure as monetary and capital markets have been nervous,” the financial institution stated in its monetary system report. “Though the standard of banks’ home and overseas mortgage portfolios has remained excessive on the entire, some loans entail excessive credit score threat.”

A bitter reminiscence runs deep amongst Japanese policymakers, who had initially underestimated the influence of the collapse of U.S. funding financial institution Lehman Brothers in 2008, describing it as a “bee sting”.

Finally, the failure of the U.S. financial institution developed into a totally fledged world monetary disaster.

Japanese policymakers and analysts see the failure of the 2 U.S. banks this time as completely different in nature from the final monetary disaster, which stemmed from subprime mortgage loans and triggered a credit score crunch.

The current banking issues occurred in opposition to the backdrop of U.S. aggressive financial tightening after years of straightforward cash coverage.

“To make sure the soundness of Japan’s monetary system, it’s obligatory to look at the dangers of contraction and overheating within the monetary system and tackle potential vulnerabilities appropriately,” the financial institution stated.

Earlier on Friday, Finance Minister Shunichi Suzuki known as for debate on monetary sector laws given the influence of social media on spreading credit score worries, elevating the danger of triggering financial institution runs.

The minister additionally revealed that roughly 140 billion yen ($1.05 billion) of Credit score Suisse’s Further Tier-1 bonds, or contingent convertible bonds, so-called CoCo bonds, had been bought to rich home traders in Japan.

“The underlying monetary markets have regained calm,” Suzuki stated. “It is regrettable that sure traders had been affected. Given cuts in principal, it is necessary for the brokerages who bought the merchandise to reply to clients in a cordial method.”

($1 = 133.8100 yen)

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