How risky is overseas lending?

Overseas lending by Japanese banks has risen sharply in recent years and now almost matches domestic lending. The bulk of foreign lending is financed in yen which exposes lenders to a sizeable currency mismatch. However, foreign lending is less risky and more profitable than lending to domestic borrowers. And with capital ratios having risen in recent years, banks should be able to cope with a rise in non-performing loans during an economic downturn.