Financial System Report (October 2026) October 23, 2026 Bank of Japan Motivations behind the October 2026 issue In global and domestic financial markets, the expansion in global AI-related demand had the effect of improving market sentiment, although uncertainties remained high…
er the situation in the Middle East. Against this background, stock prices increased, and credit spreads on corporate bonds remained at low levels
However, uncertainties remain high over factors such as the future situation in the Middle East, the profitability and financing of AI-related investment, and developments in the foreign non-bank financial intermediary (NBFI) sector. This Report assesses the stability of the financial system under such an external environment. With regard to the foreign NBFI sector, private funds and other entities have been playing an increasingly prominent role as providers of financing amid the substantial increase in global AI-related investment.
This Report examines these recent developments and, in its macro stress testing, refines the specification of the impact of a decline in expectations regarding the profitability of AI-related investment and assumes the situation where shocks are amplified mainly by portfolio adjustments in the foreign NBFI sector, thereby assessing the adequacy of banks’ capital. While no major financial imbalances have been seen in the domestic financial cycle, developments in asset prices, such as real estate prices and stock prices, continue to warrant careful attention and close monitoring. Furthermore, the Report examines the effects of the rise in raw material and energy prices reflecting the situation in the Middle East on small and medium-sized enterprises (SMEs), as well as the effects of interest rate increases on the corporate and household sectors.