(Dec 26): Japan’s Financial Services Agency (FSA) is stepping up monitoring of regional banks that lend heavily to the booming real estate sector to make sure risks are under control, according to people familiar with the matter.
The watchdog is conducting interviews with some high-risk regional banks and will consider conducting on-site inspections if necessary, said three people, who wouldn’t be identified as the information isn’t public. They said one of the concerns is a noticeable increase in lending by regional banks on real estate outside of their local areas.
The Japanese financial authorities are stepping up calls for more sophisticated management amid concerns about loan default risk, which has grown as property prices in the nation continue to rise.
Purchase prices for homes and offices have been rising in Japan, particularly in the Tokyo metropolitan area. According to a gauge from the land and transportation ministry, Tokyo residential property prices were up by 29% in September 2025 compared with December 2021. That said, the default rate for real estate has remained low.
A Financial Services Agency official declined to comment.
Regional banks will likely be required to strengthen their management systems, including the ability to analyse real estate markets outside of their local area, the people said.
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