FSA Achievements & Work Plan for Fiscal Year 2024

A couple of weeks ago, the Financial Services Agency (FSA) published its Administrative Policy (i.e., Strategic Priorities) for the Fiscal Year 2024. On Friday, an additional document was provided, covering the achievements to date for each strategic pillar, and the work plan for this fiscal year.

The FSA’s overall mission is to ensure financial system stability and promote sustainable economic growth through the effective utilization of the financial mechanism.

I. Contributing to Sustainable Economic Growth through the Financial Mechanism

This pillar focuses on fostering a “nation built on asset management” and supporting sustainable finance initiatives.

1.1. Steady Progress towards a Nation Built on Asset Management

Achievements

• Establishment of the Asset Management Nation Subcommittee under the New Capitalism Realization Council, tasked with developing a policy plan for building a nation based on asset management.
• Establishment of the Task Force on Asset Management under the Financial System Council’s Market System Working Group, focusing on the institutional framework for asset management.
• Release of the “Asset Management Nation Realization Plan” by the government, incorporating proposals from the Task Force (December 2023).

Work Plan

• Active promotion of the plan through various media campaigns, events, seminars, and collaborations with industry organizations.
• Monitoring the implementation of the plan by financial institutions, particularly focusing on their support for customer asset management and prevention of unsuitable practices related to “Growth Investment Framework” under NISA.
• Exploring ways to simplify and streamline NISA procedures using digital technologies.
• Enhancing financial literacy by supporting the newly established Financial Literacy Promotion Organization, promoting certified advisor services, and engaging in international collaboration through OECD’s International Network on Financial Education (INFE).

1.2. Ensuring Customer-Oriented Business Conduct in Financial Product Sales Companies

Achievements

• Updated and published the “Financial Business Operator List” (September 2023, February 2024), which evaluates financial institutions based on their efforts to ensure customer-oriented business conduct.
• Published analysis of reports from financial institutions regarding common KPIs for foreign currency denominated single premium insurance, structured deposits, etc. (September 2023, February 2024).
• Conducted dialogues with major banks, regional banks, securities companies, and insurance companies regarding their product governance systems, sales and management systems, and compensation structures for foreign currency denominated single premium insurance and structured deposits.
• Conducted monitoring of insurance companies with high sales volumes of foreign currency denominated insurance, focusing on customer complaint prevention and after-sales service improvements.
• Held public consultations on amendments to relevant ministerial ordinances and supervisory guidelines for the implementation of the revised Financial Instruments and Exchange Act, which mandates financial institutions to consider the best interests of their customers (June-July 2024).
• Conducted a survey on consumer awareness regarding asset management and published the results (July 2024).
• Disseminated information on customer-oriented business conduct and the FSA’s initiatives through various channels, including publications and lectures.

Work Plan

• Publish the “Financial Business Operator List” and “Common KPIs” (September 2024, February 2025). The list will be reviewed based on the results of the public consultation on the proposed amendments to the “Principles for Customer-Oriented Business Conduct.”
• Conduct dialogues with financial institutions regarding their efforts to implement the “Principles for Customer-Oriented Business Conduct” and their effectiveness.
• Monitor sales practices of foreign currency denominated insurance, focusing on long-term customer support and customer-oriented practices.
• Finalize amendments to relevant ministerial ordinances and supervisory guidelines related to the “Best Interest Rule” based on public consultation results and further examination of financial business practices.
• Continue to disseminate information on customer-oriented business conduct through publications, industry events, and other channels.

1.3. Corporate Governance Reform and Enhancement of Financial and Capital Market Functions

Achievements

• Published the report of the Working Group on Tender Offer System, Large Shareholding Report System, etc. under the Financial System Council, which discussed revisions to the large shareholding report system for promoting effective dialogue between companies and investors (December 2023).
• Enactment of the “Act Partially Amending the Financial Instruments and Exchange Act and the Act on Investment Trusts and Investment Corporations,” clarifying the scope of “joint holders” under the large shareholding reporting system (May 2024).

Work Plan

• Encourage companies to implement corporate governance reforms based on the “Action Program for Substantive Corporate Governance Reform 2024” (published June 2024), with specific initiatives like:
• Promoting the disclosure of annual securities reports before shareholder meetings.
• Reviewing the Stewardship Code to encourage collaborative engagement and enhance transparency of substantial shareholders.
• Continuing to monitor and follow up on the progress of companies’ efforts to improve profitability and growth.
• Encouraging the effective functioning of the Board of Directors and promoting sustainability-focused management.
• Promoting the listing of companies in the growth market by clarifying the examination process and expectations for information disclosure.
• Review the quarterly financial statements disclosure system in collaboration with the Tokyo Stock Exchange (TSE) and finalize the amendments to relevant ordinances and ministerial ordinances.
• Support the TSE’s initiatives for promoting stock split and for further enhancing the functionality of TOPIX.
• Continue discussions with market participants on the practical aspects of shortening the stock settlement cycle to T+1, considering the trends in overseas markets.

1.4. Ensuring Market Reliability

Achievements

• Conducted 1,146 market surveillance reviews and 69 inspections of Financial Instruments Business Operators (on a commencement basis) in FY2023, leading to 9 administrative penalty recommendations.
• Issued 30 administrative monetary penalty recommendations (19 for market manipulation and 11 for disclosure violations) and filed 4 criminal complaints.
• Issued administrative monetary penalty orders for new types of cases, such as those involving false disclosure documents, violations of the large shareholding reporting system, and market manipulation through high-frequency trading.
• Published annual reports and summaries of market surveillance activities and administrative monetary penalty cases, and held briefings for journalists to enhance transparency and understanding of market surveillance operations.
• Continued efforts to upgrade the market surveillance system, commenced design and development of the next-generation system, and promoted the use of the Deposit and Other Inquiry System to enhance efficiency and effectiveness of surveillance activities.

Work Plan

• Continue to collect information on market activities and analyze trends to identify and prevent market misconduct.
• Conduct proactive market surveillance, focusing on new products and trading practices, as well as companies struggling to meet listing standards.
• Continuously enhance the market surveillance system, including the utilization of data analytics and the implementation of the next-generation system.
• Strengthen international collaboration through IOSCO and other frameworks, share information, and contribute to global market surveillance efforts.
• Conduct risk-based inspections of financial institutions, focusing on:
• Ensuring appropriate investment solicitation and advice in line with suitability principles.
• Building robust internal control systems to manage digitalization and cyber security risks.

1.5. Enhancing Audit Quality

Work Plan

• Support the efforts of the Certified Public Accountants Association of Japan, including the Registered Auditors Registration Review Board, in implementing the new registration system for audit firms of listed companies, etc.
• Continue discussions with the Certified Public Accountants Association of Japan on ensuring the effectiveness of quality control reviews.

1.6. Promoting Startups through Provision of Growth Capital and Diversifying Investment Targets

Achievements

• Amendments to relevant laws and ordinances were made to facilitate the secondary trading of unlisted securities, including:
• Easing registration requirements for private trading systems (PTS) operating on a limited scale.
• Allowing PTS operators to operate with a Type 1 Financial Instruments Business Operator registration, without requiring separate approval.
• Published a draft of “Recommended and Expected Practices for Venture Capital” (July 2024), aiming to attract investment from a wide range of domestic and international investors.
• Implemented recommendations for simplifying disclosure requirements in securities registration statements for small-scale offerings, clarifying disclosure rules for stock compensation plans, and expanding the scope of businesses eligible for investment by bank groups.

Work Plan

• Continue to work on legislative amendments to facilitate the secondary trading of unlisted securities and to implement measures for attracting investment in venture capital funds.
• Encourage financial institutions to provide financing to startups through lending, including venture debt, and to support their growth through M&A and business succession support.
• Continue to promote regulatory reforms to facilitate the listing of companies in the growth market and to improve market liquidity.
• Work with relevant stakeholders to promote the development of a sustainable finance market in Japan, including the issuance of ESG investment products and the development of a robust ESG data infrastructure.

II. Ensuring the Stability and Reliability of the Financial System and Securing High-Quality Financial Functions

This pillar focuses on addressing challenges across different financial sectors, ensuring the stability and reliability of the financial system, and promoting access to financial services for diverse user segments.

2.1. Addressing Cross-Sectoral Challenges

Achievements

• Conducted dialogues with financial institutions to assess their business strategies, financial conditions, governance, and risk management systems.
• Conducted a survey on domestic LBO lending practices among major banks and regional banks, publishing the results and highlighting the need for sound lending practices and robust risk management.
• Monitored the impact of global economic uncertainties on the financial system and institutions, analyzing economic indicators and financial market trends.

Work Plan

• Continue to monitor financial institutions’ business strategies, financial conditions, risk management systems, and internal audit functions.
• Monitor domestic LBO lending practices and engage with financial institutions and industry organizations to promote sound lending practices and robust risk management.
• Monitor and analyze global economic and financial trends and their potential impact on the stability of the Japanese financial system.
• Collaborate with international standard-setting bodies like FSB and BCBS to contribute to global financial stability and address emerging risks.

2.2. Supporting Businesses Facing Challenges

Achievements

• Conducted intensive hearings with financial institutions to assess their efforts to support businesses, identifying bottlenecks and promoting flexibility in providing support.
• Responded to inquiries received at the Financial Services User Consultation Offices, working with financial institutions to address customer concerns and ensure appropriate handling of complaints.
• Monitored and published data on loan modification and other support measures provided by financial institutions.
• Enhanced collaboration between local finance bureaus and regional stakeholders to promote business support initiatives, including management improvement support and business rehabilitation.
• Revised supervisory guidelines to encourage financial institutions to shift from focusing on liquidity support to providing comprehensive support, including business rehabilitation and new business development support.
• Revised and disseminated the “Guidelines for Business Rehabilitation of SMEs,” aiming to clarify the roles of SMEs and financial institutions and promote higher standards of support for business rehabilitation.

Work Plan

• Continue to monitor and promote comprehensive support for businesses by financial institutions, including management improvement, business rehabilitation, and new business development support.
• Address inquiries received at the Financial Services User Consultation Offices, ensuring appropriate handling of customer concerns and promoting communication between customers and financial institutions.
• Monitor and publish data on loan modification and other support measures provided by financial institutions.
• Promote the utilization of the “Guidelines for Business Rehabilitation of SMEs” and the newly established Business Rehabilitation Information Network to facilitate effective business rehabilitation.
• Support financial institutions in strengthening their business support capabilities, including the use of the “Manual for Business Rehabilitation Support for Financial Institutions” and training programs provided by REVIC.
• Analyze and disseminate best practices of financial institutions in supporting businesses, particularly in areas of M&A and business succession, to encourage further proactive efforts.

2.3. Establishing Lending Practices Conducive to Sustainable Business Growth

Achievements

• Published data on the ratio of lending without personal guarantees and the ratio of lending with appropriate explanations and records, based on the revised supervisory guidelines.
• Monitored and shared information on best practices of financial institutions in promoting lending without personal guarantees.
• Responded to inquiries received through the “Guarantee Hotline” and provided feedback to the industry to address concerns and promote best practices.
• Published a collection of case studies on initiatives to promote lending without personal guarantees, based on the “Guarantee Reform Program” feedback from financial institutions.

Work Plan

• Continue to collect data on lending practices and monitor the implementation of the revised supervisory guidelines related to personal guarantees.
• Share best practices and address concerns raised through the “Guarantee Hotline” to promote best practices in the industry.
• Monitor and evaluate the implementation of explanation and documentation requirements for existing and new personal guarantee contracts.
• Encourage financial institutions to provide clear explanations to customers regarding the potential for guarantee release upon changes in their business ownership structure.
• Promote appropriate explanation and documentation practices for guarantee-backed loans.

2.4. Responding to the 2024 Noto Peninsula Earthquake

Achievements

• Worked closely with local finance bureaus to ensure swift and effective support for disaster victims following the 2024 Noto Peninsula Earthquake, including the issuance of “Financial Measures.”
• Promoted the utilization of the “Guidelines for Debt Restructuring of Disaster Victims,” including special provisions for COVID-19, to support individuals and sole proprietors facing difficulties in repaying existing debts like housing loans.
• Encouraged financial institutions to support businesses affected by the earthquake by providing new loans and considering the utilization of the Noto Peninsula Earthquake Reconstruction Support Fund.

Work Plan

• In case of future natural disasters, work closely with local finance bureaus to issue “Financial Measures” and ensure prompt and effective support for disaster victims.
• Continue to promote the utilization of the “Guidelines for Debt Restructuring of Disaster Victims” to support individuals and businesses facing difficulties in debt repayment.
• Monitor the implementation of the Guidelines and the support provided by financial institutions to disaster victims.

2.5. Promoting Accessible Financial Services

Achievements

• Encouraged financial institutions to adopt guardianship support accounts and trusts to enhance the safety and security of the adult guardianship system.
• Engaged in dialogue with financial institutions and industry organizations to address challenges related to handling transactions of customers with declining cognitive abilities, considering both customer convenience and the prevention of potential disputes.
• Participated in the “Orange Ring Dress Up” campaign to raise awareness about dementia and provided information on the campaign through the FSA’s social media channels.
• Supported the research project on “Financial Transactions Adapted to Cognitive Functions of the Elderly” under the Cabinet Office’s Strategic Innovation Creation Program, aiming to address challenges faced by elderly customers in financial transactions.

Work Plan

• Continue to promote the adoption of guardianship support accounts and trusts by financial institutions.
• Continue to support the research project on “Financial Transactions Adapted to Cognitive Functions of the Elderly.”

2.6. Addressing Emerging Risks

Achievements

• Shared information on bank accounts used for fraudulent activities with relevant financial institutions and assessed their efforts to suspend such accounts.
• Published data on the occurrence and compensation status of fraudulent transactions using forged cash cards and internet banking, and conducted a survey on security measures implemented by financial institutions.
• Raised awareness about phishing scams and other fraudulent schemes through various channels, including the FSA website and social media, in collaboration with the National Police Agency and other relevant organizations.
• Issued warnings and published information on unregistered financial instruments business operators, utilizing social media to reach a wider audience.
• Established a dedicated consultation service for victims of investment fraud.
• Established the “Financial Crime Response Team” to enhance information sharing and coordination within the FSA.
• Raised awareness about various predatory lending practices, including social lending, fake factoring, post-payment cashing, and advance purchase cashing, using the FSA’s social media channels, government public relations campaigns, and radio programs.

Work Plan

• Continue to share information on accounts used for fraudulent activities with relevant financial institutions and monitor their efforts to prevent further misuse.
• Promote the implementation of robust security measures by financial institutions to combat fraudulent transactions.
• Raise awareness about phishing scams, investment fraud, and predatory lending practices through various channels, including the FSA website, social media, and collaboration with relevant organizations.
• Clarify regulatory guidance on the illegality of unregistered financial instruments business operators offering free investment information in certain cases.
• Strengthen the FSA’s consultation service for victims of investment fraud.
• Collaborate with social media platform operators and industry associations to combat fraudulent investment schemes promoted through social media, including the removal of fraudulent advertisements and raising awareness among investors.

2.7. Strengthening Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures

Achievements

• Monitored the progress of financial institutions in implementing the “Guidelines on Anti-Money Laundering and Counter-Terrorist Financing,” confirming that most institutions had completed the necessary system development and personnel training by the March 2024 deadline.
• Commenced supervision of licensed foreign exchange transaction analysis businesses (3 operators as of June 2024).
• Raised public awareness about AML/CTF measures through online videos, banner ads, and other channels.
• Conducted 216 outreach activities (July 2023 — June 2024), including seminars and lectures at industry associations, to enhance financial institutions’ understanding of AML/CTF measures.
• Established cross-sectoral forums in collaboration with local finance bureaus to facilitate information sharing and networking among financial institutions in each region.
• Published the “Initiatives and Challenges in Anti-Money Laundering and Counter-Terrorist Financing Measures” (June 2024), summarizing the progress and challenges of AML/CTF measures in Japan.
• Submitted the third follow-up report to the Financial Action Task Force (FATF) based on the discussions at the “Policy Council on Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing Measures” regarding the progress of Japan’s AML/CTF measures.
• Played a leading role in the policy development at the FATF as co-chair of the Policy and Development Group, particularly in the revision of Recommendation 16 on wire transfer transparency.
• Co-chaired the FATF’s Virtual Assets Contact Group, leading discussions on the implementation of Recommendation 15 on travel rule and addressing new risks, including those associated with DeFi and P2P transactions.

Work Plan

• Conduct monitoring of financial institutions based on the “progress reports” submitted by them, ensuring the effectiveness of their AML/CTF systems, particularly focusing on customer due diligence, transaction monitoring, and risk assessment processes.
• Supervise licensed foreign exchange transaction analysis businesses and facilitate the establishment of a robust AML/CTF framework for the entire financial sector.
• Continue to work with relevant authorities to implement the “Action Plan on Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing Measures (2024–2026)” and prepare for the fifth FATF mutual evaluation scheduled for 2028.
• Continue to raise public awareness about AML/CTF measures through effective communication and outreach activities.
• Promote information sharing and best practice exchange among financial institutions through cross-sectoral forums and other initiatives.
• Continue to play a leading role in FATF, focusing on the effective implementation of FATF standards, addressing emerging risks associated with virtual assets, and promoting global AML/CTF efforts.

2.8. Strengthening Cyber Security

Achievements

• Published drafts of revised supervisory guidelines and the “Guidelines on Cyber Security in the Financial Sector” for public consultation (June 2024), incorporating feedback from previous monitoring activities and reflecting the latest cyber threat landscape.
• Expanded the scope of the Cyber Security Self-Assessment (CSSA) to include regional financial institutions, new-type banks, securities companies, insurance companies, and trust banks. Analyzed the self-assessment results in collaboration with the Bank of Japan and provided feedback to individual institutions and the industry to promote improvements in cyber security posture.
• Conducted a cross-sectoral cyber security exercise (Delta Wall VIII) in October 2023 to enhance incident response capabilities across the financial sector.
• Conducted threat-led penetration testing (TLPT) at selected financial institutions and shared best practices and common vulnerabilities identified through TLPT with the industry to enhance cyber resilience.
• Participated in the G7 Cyber Expert Group (CEG), contributing to the April 2024 cross-border cyber exercise and discussions on best practices and challenges related to cyber security.
• Engaged in discussions on cyber security supervisory challenges during the IMF’s Financial Sector Assessment Program (FSAP).

Work Plan

• Finalize the revised supervisory guidelines and the “Guidelines on Cyber Security in the Financial Sector” and ensure their smooth implementation in collaboration with industry organizations.
• Expand the scope of CSSA to major banks other than the three megabanks and labor banks, etc., and revise the self-assessment questionnaire in line with the abovementioned guidelines.
• Conduct the next cross-sectoral cyber security exercise (Delta Wall IX), incorporating the latest cyber threat landscape and feedback from the previous exercise.
• Conduct TLPT for a sample of regional financial institutions, analyzing results to identify common vulnerabilities and sharing best practices with the industry.
• Continue to participate in international discussions on cyber security, including G7 CEG and IMF FSAP, to exchange information and best practices and contribute to the global efforts to enhance cyber resilience.

III. Constantly Evolving and Deepening Financial Administration

This pillar focuses on enhancing the effectiveness and efficiency of financial administration through the use of data, closer collaboration with local finance bureaus, and proactive communication of FSA policies both domestically and internationally.

3.1. Enhancing Financial Administration

Achievements

• Conducted analysis of financial institutions’ risks, corporate finances, and market trends using data collected through the Joint Data Platform, including loan details. Published the analysis results through “FSA Analytical Notes” and developed dashboards for visualizing the results.
• Analyzed data related to customer complaints and provided feedback to relevant departments to inform supervisory and monitoring activities.

Work Plan

• Continue to utilize data analysis to enhance understanding of financial institutions’ risks, corporate finances, and market trends, actively exploring new analytical methods and technologies.
• Publish the analysis results through “FSA Analytical Notes” and other channels to share insights and engage with stakeholders.
• Develop and utilize dashboards to visualize analysis results and facilitate their use in supervisory and monitoring activities.

3.2. Strengthening Collaboration and Coordination with Local Finance Bureaus

Achievements

• Promoted information sharing and collaborative efforts with local finance bureaus to ensure effective and efficient implementation of financial administration.
• Enhanced collaboration with local finance bureaus in addressing key challenges faced by regional financial institutions, including business support and governance and human capital development, sharing insights and best practices.
• Enhanced communication with local finance bureaus through regular meetings and information sessions.

Work Plan

• Continue to enhance collaboration and coordination with local finance bureaus to ensure effective and efficient implementation of financial administration, particularly in the areas of market surveillance, business support, and supervision of regional financial institutions.
• Continue to engage in open and constructive dialogue with local finance bureaus to address challenges and share best practices.

3.3. Enhancing Policy Communication Domestically and Internationally

Achievements

• Developed internal guidelines for FSA staff to enhance the effectiveness and consistency of public communication activities.
• Conducted training sessions for FSA staff to improve their communication skills and knowledge of effective communication practices.
• Collaborated with the Cabinet Public Relations Office to organize briefings for the media on key policy initiatives.
• Created dedicated English-language websites for key policy initiatives, including the “Asset Management Nation” and “Japan Weeks” initiatives, and actively disseminated information through the official FSA English-language Twitter account.

Work Plan

• Continue to enhance the FSA’s communication strategy to effectively communicate policy initiatives to domestic and international audiences.
• Develop and disseminate informative content on key policy initiatives through various channels, including the FSA website, social media, and traditional media outlets.
• Actively engage with domestic and international stakeholders, including financial institutions, investors, academics, and policymakers, to share insights and promote dialogue.

Conclusion

This recently published document highlights the key achievements and work plans of the FSA for the 2024 fiscal year. The FSA will continue to strive to fulfill its mission of ensuring financial system stability and promoting sustainable economic growth by adapting to the rapidly changing environment, addressing emerging risks, and fostering innovation in the financial sector. Through effective use of data, close collaboration with stakeholders, and proactive communication, the FSA aims to contribute to the realization of a vibrant and resilient financial system that benefits all stakeholders.

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