Japanese banks have improved their resilience to rising interest rates by rebalancing their domestic bond portfolios, the Bank of Japan said in its semi-annual report on financial systems on Thursday.

The BOJ's latest analyses of risks in the financial system come as the central bank ended eight years of negative interest rates last month, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.

All types of banks have shortened the duration of their yen-denominated bond holdings, reducing interest rate risk, especially in the longer-term zone, the report said.

It also noted that from a macro perspective, an improving economy and the resulting rise in interest rates can be expected to lead to an improvement in household income and the interest-related balance.

Overall, Japanese banks have sufficient capital and stable funding bases to withstand various types of stress, the report said.

But vigilance against tail risks was still warranted, it added, adding that the period of stress may be prolonged further with continuing global monetary tightening and the resultant concerns about a slowdown in foreign economies. (Reporting by Makiko Yamazaki Editing by Chang-Ran Kim)