Macro Stress Testing in the Financial System Report (April 2017)

April 21, 2017
Financial System and Bank Examination Department
Bank of Japan

• Full Text [PDF 1,387KB]
• Scenario Table [XLSX 40KB]

Abstract

In the Financial System Report, two macro stress tests are implemented: (1) a "tail event scenario" that assumes a set of severe financial and economic conditions equivalent to the Lehman shock for each regular test, in order to assess the stability of the financial system through fixed-point observations; (2) a "tailored event scenario" that varies according to macroprudential concerns at the time of the test and seeks to examine the vulnerabilities of the financial system to these specific concerns. In the April 2017 issue of the Report, the tailored event scenario features the impact of shocks in the real estate sector on the financial system, given a recent increase in Japanese financial institutions' exposures related to real estate. This paper explains the specifics underlying the stress scenarios, and the background to the approach employed.

Notice

Please contact the Financial System and Bank Examination Department at the e-mail address below to request permission in advance when reproducing or copying the contents of this paper for commercial purposes.

Please credit the source when quoting, reproducing, or copying the contents of this paper for non-commercial purposes.

Inquiries

Financial System Research Division, Financial System and Bank Examination Department

E-mail : post.bsd1@boj.or.jp