Japan's government advisory panel has urged the Bank of Japan (BOJ) to incorporate corporate funding risks into its monetary policy decisions. This recommendation follows the BOJ's semiannual Financial System Report, which highlighted rising corporate default risks linked to escalating Middle East tensions. The report pointed out vulnerabilities in Japan's non-bank financial sector and potential spillover effects from global conflicts, particularly how instability in the Middle East could increase energy costs and push more Japanese companies toward default. The advisory panel emphasized that the BOJ should avoid setting interest rates in isolation, cautioning against tightening monetary policy if it risks exacerbating corporate stress. Japan's recent $10 billion aid commitment to Asian countries for regional energy security underscores Tokyo's concern over energy threats to its economy. The International Monetary Fund (IMF) has also advised the BOJ to maintain clear communication about its policy intentions, given Japan's high public debt ratio of 204% of GDP, one of the highest among developed economies.