Japan keeping close tabs on markets after collapse of US lenders

Kyodo News

Posted at Mar 14 2023 01:24 PM

TOKYO - Japan's government will closely monitor developments in the financial markets and their impact on Japanese financial institutions after the collapse of two U.S. regional banks caused concern about the risk of contagion and roiled global markets, a minister said Tuesday.

Financial services minister Shunichi Suzuki expressed confidence in Japan's banking system, arguing financial institutions have enough liquidity and strong capital bases.

"At this point, we think the possibility of the recent collapse (of the U.S. banks) leaving a serious impact on the stability of the Japanese financial system is low," Suzuki told a press conference after a Cabinet meeting. "The financial system is relatively stable."

"The Financial Services Agency will need to closely watch economic and financial market developments both at home and abroad and monitor how Japanese financial institutions will be impacted," Suzuki added.

California-based Silicon Valley Bank, a major lender for startups, collapsed on Friday after interest rate hikes by the U.S. Federal Reserve hurt the value of its bond holdings and the bank suffered a run on deposits.

The failure also hit New York-based Signature Bank, prompting U.S. regulators to take control of the lender on Sunday, two days after doing the same for Silicon Valley Bank.

As investors cut risk exposure, global stock markets tumbled and safe assets found favor, even as U.S. regulators announced a plan to contain the fallout and U.S. President Joe Biden said the banking system is safe. Japanese shares continued to fall on Tuesday.