BANK OF JAPAN: BANK OF JAPAN HAS REDUCED INTEREST RATE RISK THE FINANCIAL SYSTEM REMAINS SOUND

The Bank of Japan said its banks have reduced interest rate risk and the financial system remains sound despite strains in the United States and Europe, Zhitung Finance APP has learned.

The Bank of Japan said Friday in its semiannual financial system report that "the number of yen and foreign currency interest rate risks has decreased as banks rebalance their securities portfolios," and that "overall, banks' resilience to rising interest rate risks has been increasing."

The report provides the BOJ's most comprehensive assessment of the financial sector following the collapse of Silicon Valley banks and the emergency sale of Credit Suisse last month, which sparked global turmoil.

Rising interest rates at home and abroad have led to valuation losses on bonds and other financial instruments, the BOJ said. While such losses have fallen since March, partly due to lower domestic interest rates, "they could rise again depending on foreign interest rate developments and the resulting repricing of risk assets", the bank said.

Japanese officials say the country's banks are unlikely to experience the kind of stress faced by Silicon Valley banks. Silicon Valley Bank collapsed after a flood of depositors' withdrawals forced it to sell assets at a loss.

"No Japanese bank has unique liability characteristics similar to those of the failed US bank," the BOJ said.

However, banks are increasingly diverging on the degree of interest-rate risk and how to rebalance their portfolios, the BOJ said. "As uncertainty about future developments remains high, banks need to appropriately manage market risks in light of changing risk profiles.