BOJ Semi-Annual Financial Report: The creditworthiness of highly leveraged firms could deteriorate

“With overseas interest rates rising quickly, there is a risk the creditworthiness of highly leveraged firms could deteriorate,” states the Bank of Japan (BOJ) in its semi-annual financial report published early Friday.

Key quotes

Japan's financial system remains stable as a whole.

Japan's financial institutions hold sufficient capital, liquidity buffers.

There is a chance Japan's financial system may come under prolonged stress such as from continued rate hikes by overseas central banks, fears of global growth slowdown.

Don't see big financial imbalances in Japan financial system now.

Foreign loan portfolios have a somewhat high percentage of highly leveraged firms, which are likely to be sensitive to interest rate rises.

Financial institutions' valuation losses on securities have increased recently, such losses could increase further depending on future interest rate developments.

Results of macro stress test indicates Japanese financial institutions on the whole are resilient to stress events.

USD/JPY grinds higher

USD/JPY remains firmer around the 32-year high marked earlier in the day, around 150.40 by the press time.

Also read: USD/JPY teases Tokyo intervention near 32-year high above 150.00 despite strong Japan inflation, yields