This report reviews the risks surrounding the Japanese financial environment from macro and micro perspectives. The Bank of Japan (BOJ) has reduced the purchases of government bonds since September 2016, when it started Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control (YCC). If the rate continues to fall, the BOJ’s monetary base could decrease. To continue expanding the monetary base, we must rely on channels other than government bond purchases, but options are limited. As management of regional financial institutions has become increasingly difficult due to the prolonged low interest rate environment, the announcement of core business net income, excluding the loss on cancellation of investment trusts, began in FY09/19. Some banks have increased their reliance on surrender profits while maintaining higher dividends, and need to be alert regarding their capital position. Industry restructuring, including alliances with other industries, is the first step towards building a sustainable business model, and has been supported by the easing of voting rights and restrictions on investments in other financial institutions. However, if the BOJ’s stalled policies or the operating environment of regional financial institutions worsens, stress on the financial markets may rise, increasing the risk of financial system instability.