In 2017，Bank of Japan sticks to the 2% inflation target and maintains its ultra-loose monetary policy. As the result，Japan’s economy is no longer in deflation，which，meanwhile，does not mean that Japan has completely got rid of the long-term deflationary dilemma. Under the negative interest rate and yield curve control，the various yields rate are extremely low. With loan-deposit interest spreads becomes narrowed，the financial institutions profitability is declining. The situation of Japan’s local banks is in particular grim and the potential risks of financial system increase. In the future，Japan’s authorities will pay more attention to the potential vulnerability of the financial system. Japan’s financial institutions will also undertake structural reforms in order to raise their profitability and competitiveness.