Japan’s banks have more than doubled their borrowings in dollars since 2007, what makes them vulnerable to financial shocks, the Bank for International Settlements (BIS) warned on Sunday.
According to the BIS, dollar- denominated assets on the balance sheets of Japanese banks rose to about $3.5 trillion by the end of 2016. They exceed liabilities in dollars by about $1 trillion, thus creating a large so-called long position in the currency.
New regulation rules after the financial crisis led to less US money market funds, which provide short-term funding in dollars for banks around the world, the organization warned.
In recent years, Japanese and Canadian banks have been expanding their presence in the United States. According to the Federal Reserve, Mitsubishi UFJ Financial Group Inc. increased its US assets by about a third over the past two years. Canada’s Toronto-Dominion Bank now controls the seventh-largest US retail bank.
