Back to List
JCER Financial Stress Index

JCER Financial Stress Index is 0.025, released on March 29, 2021

- The central banks in Japan, the US and Euro decided to continue monetary easing, and financial stress remains low level

  Senior Economist


  The JCER Financial Stress Index for Japan is an indicator based on daily market data to capture the rise of financial systemic risk, which could cause a malfunction of the entire financial system and adversely affect the real economy. Since this index is based on market data, it is possible to quantitatively grasp financial stress in near real time.
  The index is constructed by selecting three individual indicators from the following five sub-markets: (1) stock market, (2) money market, (3) bond market, (4) financial intermediaries (banking sector), and (5) foreign exchange market.

The latest value: 0.025   <-0.007 from the last weekend>
(As of March 26, 2021)


  The index is designed to detect a recurrence of financial system instability in the late 1990s in Japan and of the global financial crisis of 2007-08. With reference to the “Composite Indicator of Systemic Stress” by European Central Bank (ECB), this is created by compositing the following 15 financial market data, such as stock price and its volatility, bond yield spreads, and exchange rate changes.

Stock market: Volatility of TOPIX (absolute value of log return), Ratio of TOPIX to its highest value in the past two years, Liquidity indicator based on trading volume
Money market: Spread between 3-month TIBOR and 3-month Treasury yields, Repo rate, Dollar funding premium (yen basis, 1 year)
Bond market: Volatility of 10-year government bonds (absolute value of change in yield), Swap spread (difference between 2-year swap rate and 2-year government bond yield), BBB rated corporate bond spread
Financial intermediaries (banking sector): Specific shock on bank stocks (estimating the variance of the residuals obtained by regressing the returns of the bank stock index on the returns of TOPIX using the GARCH (1,1) model), Ratio of TOPIX banking stock index to its highest value in the past two years, Banking sector bond spreads
Foreign exchange market: Volatility in yen/dollar exchange rate (absolute value of log return), Volatility in yen/euro exchange rate (absolute value of log return), Volatility in yen/pound exchange rate (absolute value of log return)

For more details of this index, please refer to the following reports and literature.
  Japan Center for Economic Research, 2019. “Risks in the BOJ’s ETF Purchases and Regional Financial Institutions - A stress event could reignite financial system anxiety,” FY 2019 Financial Research Report II: Overhauling Financial Risks in Japan (No. 41), February 12, 2020. (members only).
  Holló, D., Kremer, M. and Lo Duca, M., 2012. “CISS - A Composite Indicator of Systemic Stress in the Financial System,” Working Paper Series, No. 1426, European Central Bank, March 2012.

  Given that the stress on financial markets due to a spread of the novel coronavirus (COVID-19) has calmed down compared to the past few months, we change the operation of this index which has released weekly so far. Henceforth, we update the index once a month in principle, and release it on the last Monday (the next business day if it is a holiday). When significant fluctuations in the financial markets occur, we are to update and release the index temporarily.


JCER Financial Stress Index is 0.072, released on July 26, 2022

- The BOJ has decided to continue massive easing program
- The yen strengthened against the dollar due to caution about the US economy, financial stress remains a low level



JCER Financial Stress Index is 0.051, released on June 27, 2022

- Major central banks around the world move to raise interest rates, while the Bank of Japan maintains massive easing
- Widening Interest rate differentials between Japan and the US drives yen to 24-year low, financial stress remains a low level



JCER Financial Stress Index is 0.031, released on May 30, 2022

- Bank of Japan has decided to continue massive easing program, dollar-yen exchange rate temporarily hit 20-year low
- The stock market continues to move back and forth with little sense of direction, financial stress remains a low level



JCER Financial Stress Index is 0.034, released on April 26, 2022

- Financial stress remains low level as a mood of restraint prevails ahead of the holidays
- Great uncertainty lies in the future over the situation in Ukraine



JCER Financial Stress Index is 0.034, released on December 27, 2021

- Bank of Japan decided to maintain large-scale easing, while CP and corporate bond buying measures to be phased out
- Financial stress remains low, but concerns about the Omicron variant are rising