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The Financial Macro-econometric Model (FMM, 2022 Version)

March 30, 2023
ABE Nobuhiro*1
KANAI Kenji*3
OKUDA Tatsushi*7
TAKANO Yutaro*8
Financial System and Bank Examination Department, Bank of Japan


The Financial Macro-econometric Model (FMM) is the model that the Bank of Japan (BOJ) employs in its macro stress testing to examine the risk resilience of Japan's financial system in a comprehensive and quantitative manner. The BOJ semiannually publishes the results of its analyses based on this model in the Financial System Report. The FMM is also used in the simultaneous stress testing based on common scenarios conducted periodically with the Financial Services Agency of Japan. Key characteristics of the FMM are that it (1) explicitly captures feedback loops between the domestic banking sector and the real economy, and (2) makes it possible to calculate the variables of interest (e.g. amount of loans and capital adequacy ratios of Japanese banks), not only at the sector level but also at the individual bank level. Since its development in 2011, the FMM has been continuously improved to reflect new developments in economic and financial conditions and to better incorporate the transmission mechanisms of financial shocks into the macro stress testing. This paper provides an outline of the basic macro stress testing framework and the FMM, and then describes the structure of the model as of September 2022 in detail.

JEL classification
E10, E32, E44, E47, G10, G21, G28

Banks' stability, Macro stress test, Capital buffer regulation

The authors would like to thank AOKI Kosuke, INATSUGU Haruhiko, MIYAKAWA Daisuke, SUDO Nao, SUZUKI Koichiro, TAMANYU Yoichiro, and TOMURA Hajime for their helpful comments. In addition to the authors, ARAI Katsumi, KATAGIRI Mitsuru and MIURA Ko contributed considerably to the recent development of the FMM. The authors are also grateful to the external experts, who belong to international institutions, domestic and foreign public sectors, research institutions and financial institutions, for their insightful discussions. Any errors or omissions are the responsibility of the authors. The views expressed here are those of the authors and should not be ascribed to the Bank of Japan.

  1. *1E-mail :
  2. *2Currently at Research and Statistics Department
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  3. *3Currently at Personnel and Corporate Affairs Department
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  4. *4E-mail :
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  6. *6E-mail :
  7. *7Currently at International Monetary Fund
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  8. *8E-mail :


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