Bank of Japan warns of risks from AI market shock, cyberattacks

By Leika Kihara and Makiko Yamazaki TOKYO, Oct 23 (Reuters) The Bank of Japan warned on Friday of rising risks caused by AI, including growing cybersecurity threats and potential market shocks, that could spill over to ​the country s banking system. While the BOJ said in its semi-annual report ‌it did not see any major financial imbalances, it said rising property and stock prices warranted careful attention given still-low interest rates. Japan s financial system may have become more susceptible to global market fluctuations as domestic banks have steadily increased lending to foreign non-bank financial institutions (NBFIs), which are big hyperscaler ‌funders, ​the BOJ said in the report on Japan s banking ⁠system. If expectations regarding the profitability ⁠of AI-related investment were to decline, shocks could be amplified, mainly through portfolio adjustments in the foreign NBFI sector, and the effects could spill over to Japan, it said. NBFIs are involved in what is commonly