Key facts
- Japan's Financial Services Agency (FSA) will scrutinize lending to overseas nonbank lenders and real estate firms.
- The FSA will review investment, lending, and risk management policies for data centers and similar facilities.
- The regulator is also increasing oversight of ultralong mortgage lending, such as 50-year home loans.
- Concerns exist regarding repayment risks for long-term mortgages if interest rates rise or incomes decline.
- The FSA may directly engage with banks if necessary to ensure adequate risk management.
Japan's Financial Services Agency (FSA) is set to intensify its examination of whether domestic financial institutions are properly evaluating the credit risks associated with their lending to overseas nonbank lenders and real estate companies. This heightened scrutiny extends to investment and lending policies, project screening, and risk management practices for facilities such as data centers.
In parallel, the financial regulator is also increasing its oversight of ultralong mortgage lending, particularly home loans with terms of up to 50 years, which have become more prevalent among younger borrowers with modest incomes. The FSA's concern stems from the potential repayment risks that could arise if interest rates increase or borrowers' incomes decrease, especially given that traditional Japanese mortgages typically have repayment periods of up to 35 years. Lenders like SBI Shinsei Bank and Rakuten Bank have begun offering these extended-term mortgages.