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

Author: International Monetary Fund. Monetary and Capital Markets Department

Volume/Issue: Volume 2024 Issue 117

Publication date: May 2024

ISBN: 9798400274862

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Finance , Money and Monetary Policy , International - Economics , Environmental Economics , Business and Financial , scenario analysis , Japan FSAP , BOJ initiative , TCFD disclosure , FSAP finding , Climate change , Insurance companies , Climate finance , Financial stability assessment , Global

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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.