Physical risks from climate change faced by Japan's financial institutions: Impact of floods on real economy, land prices, and FIs' financial conditions

Takuro Ashizawa, Kakuho Furukawa, Ryuichiro Hashimoto, Yoshiyasu Koide, Tomomi Naka, Kenji Nishizaki, Nao Sudo and Genichiro Suzuki
Additional contact information
Takuro Ashizawa: Bank of Japan
Kakuho Furukawa: Bank of Japan
Ryuichiro Hashimoto: Bank of Japan
Yoshiyasu Koide: Bank of Japan
Tomomi Naka: Bank of Japan
Kenji Nishizaki: Bank of Japan
Genichiro Suzuki: Bank of Japan

No 22-E-2, Bank of Japan Review Series from Bank of Japan

Abstract: This article overviews implications of physical risks from climate change to Japan's financial institutions (FIs), focusing on the impacts of floods on the real economy, land prices and FIs' financial conditions. Floods cause massive direct damage to human lives and material resources. The empirical analyses using Japan's data suggest that the indirect effect of such damage on the real economy, land prices, and FIs' financial conditions has not been sizable over the analysis period, as the effect diminishes over time with the progress of reconstruction. The long-term simulation using a medium-scale macroeconomic model that takes into consideration possible climate changes and increases in flood damage in the future, however, suggests that the indirect effect can have a non-negligible impact on real GDP and FIs' net worth going forward. The outlook for the physical risks is extremely uncertain, varying depending on multiple factors including the pace of transition to a de-carbonized economy and interactions between the global average temperature and the frequency and scale of disasters, as well as productivity of the economy.

Keywords: Climate change; Natural disaster; Physical risk; Financial stability (search for similar items in EconPapers)
JEL-codes: E37 G21 Q54 R30 (search for similar items in EconPapers)
Date: 2022-03-14
New Economics Papers: this item is included in nep-agr, nep-ban, nep-env, nep-fdg and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.boj.or.jp/en/research/wps_rev/rev_2022/data/rev22e02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boj:bojrev:rev22e02

Access Statistics for this paper

More papers in Bank of Japan Review Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().