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Japanese financial institutions have sufficient capital buffers to absorb any losses caused by various external risks, such as rising overseas interest rates, the Bank of Japan (BOJ) said on Tuesday.
But many regional banks faced challenges in risk management such as analysing the impact on their portfolios in times of heightened market volatility, the BOJ said in an annual report on its on-site examination results of financial institutions.
Japanese financial institutions have actively taken on market risk in recent years amid ultra-low interest rates, though they have become “somewhat cautious” on their investment in light of rising global interest rates, the BOJ said.
