The Bank of Japan warned of growing risks from AI, including cybersecurity threats and potential market shocks, that could impact Japan's banking system. The central bank noted that a decline in AI-related investment expectations could trigger global market adjustments, affecting Japanese stocks and potentially Japanese banks due to their stockholdings.
The Bank of Japan's warning highlights potential systemic risks to Japan's financial system stemming from AI market volatility and cyber threats, which could impact banks and broader market stability.
The Bank of Japan warned in its semi-annual report on Friday of increasing risks associated with artificial intelligence, including escalating cybersecurity threats and the potential for market shocks that could affect Japan's banking system. While the BOJ indicated no major financial imbalances, it flagged rising property and stock prices as areas requiring attention due to persistently low interest rates. The report noted that Japanese banks' increased lending to foreign non-bank financial institutions (NBFIs), which fund hyperscalers, makes the financial system more susceptible to global market fluctuations. If expectations for AI-related investments falter, shocks could be amplified through foreign NBFIs, potentially impacting Japanese stocks and banks. The BOJ also urged financial institutions to enhance their preparedness for threats like generative AI misuse, emphasizing that cyber incidents can spread across institutions and pose a macroprudential risk.
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