Japan’s interest rate rise exposes regional bank vulnerabilities

Japan’s rising interest rates may negatively impact the country’s regional banks if they do not have adequate capital buffers to counterbalance the potential loss of investment value, according to analysts.

In the report Strong Liquidity Will Mitigate Increased Risks from Rising Rates, published in May, Moody’s highlights that while Japan’s largest banks will see profitability improve with rising interest rates, the country’s many regional banks may be slower to see the benefits.