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JCER Financial Stress Index

JCER Financial Stress Index is 0.105, released on May 18, 2020

- State of emergency lifted in some regions, financial stress fell due to expectations for economic resumption

  Senior Economist


  The JCER Financial Stress Index for Japan is, based on daily market data, an indicator to capture the rise of financial systemic risk. Systemic risk is defined that financial system as a whole is malfunctioning and the real economy is adversely affected. 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 intermediation (banking sector), and (5) foreign exchange market.

The latest value: 0.105 (As of May 15, 2020)


  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. This index refers to the “Composite Indicator of Systemic Stress” by European Central Bank (ECB) and 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 intermediation (banking sector): Specific shock to 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 of yen/dollar exchange rate (absolute value of log return), Volatility of yen/euro exchange rate (absolute value of log return), Volatility of 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.


JCER Financial Stress Index is 0.054, released on October 25, 2021

- Wait-and-see mood prevails before the general election and announcement of financial results of major companies
- Wariness about Chinese real estate debt problem is eased for the present, and financial stress remains low level



JCER Financial Stress Index is 0.036, released on September 27, 2021

- A state of emergency is expected to be lifted at the end of September
- China's real estate unrest receded tentatively and financial stress remains at a low level



JCER Financial Stress Index is 0.059, released on August 30, 2021

- Declaration of a state of emergency has been extended and the target area has expanded due to a rebound of infection, and financial stress remains low level



JCER Financial Stress Index is 0.025, released on July 26, 2021

- Infection spreads again with arrival of a fifth wave of the COVID-19, while financial stress remains low and stable



JCER Financial Stress Index is 0.016, released on June 28, 2021

- While the state of emergency in the nine prefectures has been lifted, the Bank of Japan has decided to extend Special Funds-Supplying Operations to Facilitate Financing until the end of March 2022 and financial stress remains low level