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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.