Despite the tense situation in the Middle East, the risk of default by Japanese companies remains stable.

The "Financial System Report" of the Bank of Japan shows that since the beginning of the Iran war at the end of February, the expected default rate of Japanese companies has not significantly increased, indicating that the impact of geopolitical risks on the private sector in Japan may not be severe. However, the Bank of Japan pointed out that depending on the future direction of the Middle East situation, the cost of bulk commodity procurement for companies may remain high, and supply chain disruptions may also inhibit economic activity. "In this situation, it is still necessary to closely monitor the potential impact on corporate financial conditions and cash flow management," the Bank of Japan said.