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IMF Warns Government Debt Holdings Risk Bank Stability in Japan

Japanese banks are placing the financial system at risk by putting too much of their money in government bonds, the International Monetary Fund said, echoing comments by Bank of Japan Governor Masaaki Shirakawa.

“The financial system’s massive holdings of government bonds leave it exposed to a spike in yields,” IMF staff wrote in their Financial System Stability Assessment report released today in Washington. Exposure to government debt “constitutes one of the central macrofinancial risks for the system.”