Financial Services Agency to scrutinize AI data center lending

The Financial Services Agency flagged project finance, including data centers, for enhanced monitoring in policy priorities it announced earlier this month, placing it alongside lending to the domestic real estate sector. The official said the agency sees AI data centers as a growth sector and has no intention of discouraging financing to them, even as it pays closer attention to the risks.

The agency's review will look at areas including the lenders' risk-management frameworks. The senior official pointed to uncertainty over whether hyperscalers can generate adequate returns on their massive spending, as well as the debate over the rapid pace of development and its safety.

Japan's move fits a broader pattern of regulators weighing AI-related infrastructure financing. The European Central Bank examined the risks faced by banks in the region from the artificial intelligence industry, Bloomberg reported in February. In Asia, Singapore's central bank has warned that uncertainty over sustaining massive AI investments is a key challenge for global growth and financial markets. How far the Japanese review translates into changed lending practices may hinge on whether the agency's concerns over hyperscaler returns are borne out.