The Bank of Japan comments in its latest financial system report
- Banks’ profit are fairly high, interest income is trending down
- Harder for banks to profit by increasing risk assets
- Banks must raise core profitability to keep system stable
- Banks have sufficient capital and loss-absorbing capacity
Nothing much here that pertains to monetary policy but one of the key areas the central bank does keep an eye on when it comes to adjusting policy is bank profitability. Or in other words the stress of negative interest rates on banks. Just take note of the language on that from the comments here, so far they don’t seem too overly worried in carrying on with the current easing policies at least.