IMF Staff Country Reports

Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues

May 13, 2024

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International Monetary Fund. Monetary and Capital Markets Department "Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues", IMF Staff Country Reports 2024, 117 (2024), accessed December 21, 2024, https://doi.org/10.5089/9798400274862.002

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Summary

This paper presents a technical note on Financial Supervision and Regulation of Climate Related issues in Japan. Japan's transition to a net zero economy requires the decarbonization of high-greenhouse gas intensive industrial sectors such as steel. The Japanese authorities have been working on a number of climate-related activities relevant to banks and insurers. Banks and insurers have identified transition and physical risks as potential sources of increasing credit risk, market risk, liquidity risk, operational risk, and reputational risk. Discussions with Financial Services Agency (FSA) supervisory staff revealed that there is yet to be a systematic approach to addressing climate issues in regular supervisory interactions with banks and insurers. The Climate Guidance sets out the FSA’s expectations for financial institutions to support clients’ and investees’ responses to climate change in order to manage financial institutions’ climate-related risks. Japan is leading the way in the implementation of climate-related disclosures.

Subject: Climate change, Climate finance, Environment, Financial institutions, Financial sector policy and analysis, Financial stability assessment, Insurance companies, International organization, Monetary policy

Keywords: BOJ initiative, Climate change, Climate finance, Financial stability assessment, FSAP finding, Global, Insurance companies, Japan FSAP, Scenario analysis, TCFD disclosure

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