Japan's Financial Sector Shows High Level of Risk-Taking

Forex News

Japan's financial system remains stable as a whole but there is a growing divergence between regional banks that are profitable and those that are suffering. In its semi-annual report on the financial system, the Bank of Japan said there were no signs of excessive risk-taking among Japanese financial institutions.

According to the BoJ, risk-taking in Japan's financial sector hit a near three-decade high in the April-September. The index measuring excess risk-taking showed such financial activity was at its highest level since 1990, when Japan experienced the burst of an asset-inflated bubble.

Many of Japan's regional banks grapple with diminishing returns from their traditional lending business and have blamed the BoJ's ultra-loose policy for their plight. The Bank of Japan and financial regulators argue that structural factors, such as a shrinking population outside Japan's biggest cities, are also behind diminishing profits at regional banks.