- Internationally active banks, simulated capital adequacy ratio, rises in foreign interest rates scenario plus · End of fiscal 2028 (simulation)8.9 %
- Same banks, baseline scenario · End of fiscal 2028 (simulation)12.8 %
- Japanese banks' loans and investment to foreign NBFIs · End of June 2026126 trillion yen
- Major banks' overseas lending: foreign funds / data centers share · As stated in the October 2026 report9 / 3 %
Internationally active Japanese banks' simulated capital adequacy ratio would fall to 8.9% at the end of fiscal 2028, against 12.8% in the baseline scenario, if higher foreign interest rates and crude oil prices combined with a fall in expectations for AI-related investment, amplified by non-bank investors, the Bank of Japan said in its Financial System Report on 23 October 2026. In that scenario, which the report calls the rises in foreign interest rates scenario plus, Japanese banks' capital ratios stay above regulatory requirements overall. Domestic banks excluding shinkin would hold 8.8%, against a 4% core capital ratio requirement.
| Bank type | Baseline | Financial stress | Rises in foreign interest rates plus |
|---|---|---|---|
| Internationally active banks | 12.8 | 10.1 | 8.9 |
| Domestic banks (excl. shinkin) | 10.4 | 8.6 | 8.8 |
| Domestic shinkin banks | 14.0 | 12.6 | 13.2 |
Source: Bank of Japan, Financial System Report (October 2026), Chart VI-2-5 and Chart VI-2-7, End of fiscal 2028 (simulation). The report gives the requirements as a CET1 capital ratio of 4.5% for internationally active banks, plus buffers including a 2.5% capital conservation buffer, and a core capital ratio of 4% for domestic banks.
The scenario assumes U.S. AI-related stocks fall sharply in line with the dot-com bubble collapse and U.S. corporate bond spreads widen by an additional 600 basis points compared with the April 2026 report's version, because of the amplification effect of non-bank financial intermediaries (NBFIs). For internationally active banks, simultaneous falls in stock and bond prices weigh heavily on capital because valuation gains and losses on securities count in their regulatory capital, the report says.
- -7%Asian real GDP, maximum deviation
- -5%U.S. real GDP
- -4%Japanese real GDP
- -50%U.S. stock prices
- -40%Japanese stock prices
- +1,100 bpsU.S. BBB corporate bond spreads
- $180 per barrelWTI crude oil futures, assumed temporary level
Source: Bank of Japan, Financial System Report (October 2026), Chart VI-2-6 and section VI-B, Simulation period, April-June 2026 to January-March 2029.
Japanese banks' loans to and investment in foreign NBFIs stood at 126 trillion yen at the end of June 2026, up from 8 trillion yen in March 2008, and foreign investment funds' holdings in Japanese markets reached 408 trillion yen, up from 111 trillion yen in March 2008, according to the report. The Bank of Japan says banks engaged in lending to foreign funds and data centers need to carefully manage the quality of their portfolios.
- Bank of Japan, Financial System Report (October 2026), full text (English translation, PDF), 23 Oct 2026, 08:00 CEST
- Bank of Japan, Financial System Report (October 2026), release page, 23 Oct 2026, 08:00 CEST