Building Prosperity: Japan’s ambition to become a leading asset management center

To the point 

The JFSA considers the “Policy Plan for Promoting Japan as a Leading Asset Management Center” as a long-term, sustainable policy with the goal of   lifelong financial well-being and happiness of Japanese citizens.

Efforts have shown tangible outcomes. Assets under management by asset management companies are increasing, and household financial assets are also on the rise in Japan. 

However, there remains considerable growth potential, and the JFSA aspires for the entry of international asset management players to enhance healthy competition and bring renewed dynamism to Japan’s domestic asset management industry.

Introduction

The Financial Services Agency, Government of Japan, published the "Policy Plan for Promoting Japan as a Leading Asset Management Center" in December 2023, with the aim to reform Japan’s asset management sector and asset ownership.

Under the initiative of revitalizing the Japanese economy through policy measures, the Japanese government has been taking various measures to achieve a virtuous cycle of growth and distribution where Japan's household savings can flow more into return-seeking investments, and the benefits of increased corporate values are returned to households, leading to further private sector investment and consumption.

In relation to the asset management business, the initiative focuses on engagement by stakeholders in the investment value chain, including distributors, corporations, households, asset managers, and asset owners, to promote best practices and long-term value creation these dynamics.

The following chart summarizes the key objectives and expected outcomes of Japan’s asset management sector reforms.

Source: Japan Financial Services Agency

Deloitte Japan had the honor of interviewing Mr. Jutaro Kaneko, Deputy Commissioner for International Affairs of the JFSA, to hear first-hand how the Japanese government is pursuing this initiative.

Mr. Kaneko joined the Bank of Japan in 1997 and has held various leadership positions in both the Bank of Japan and the JFSA, including Director for International Financial Markets (Settlements) at the JFSA and Director and Deputy Head of the International Division of the Financial System and Bank Examination Department at the Bank of Japan. He has been in his current role at the JFSA since 2024.

Performance Magazine 47 (PM47): What is the background to this policy measure?

Mr. Jutaro Kaneko (JK): The aim is to realize a virtuous cycle of growth and distribution. Household funds that are allocated from savings to investments will allow companies to invest more to increase their corporate value. As a result, we expect that the benefits will be reflected in household incomes, particularly through increased asset income.

Japan has one of the largest household asset amounts in the world, for an overall total of approximately 2,200 trillion yen. However, many of these assets are held in the form of cash and deposits.

During the era of low inflation and deflation, the opportunity cost of holding such large amounts in cash may not have seemed significant. However, this situation is not ideal for long-term economic growth. Additionally, Japan is facing demographic challenges such as an aging population and a declining birth rate. This means that Japanese citizens need to prepare for longer lifespans after retirement. In light of these factors, we decided to take policy actions to ensure the lifelong financial well-being of Japanese citizens.

Source: Japan Financial Services Agency

(Note 1) Pension entitlements related to private pensions (funded method) are recorded as assets in the “Pensions, Insurance and Fixed Guarantees” of each country, but those related to public pensions (pay-as-you-go method) are not recorded.

(Note 2) Outstanding amounts of stocks, investment trusts, and debt securities in Japan include estimates proportionally based on the outstanding amount of foreign securities investment (total of shares issued by non-residents, foreign investment trusts, and bonds issued by non-residents) in the Bank of Japan's Flow of Funds Statistics.

Source: Compiled by the Financial Services Agency based on data from the Bank of Japan, Federal Reserve Board, and Office for National Statistics.

PM47: How do you see the investment chain/asset management business chain in Japan?

JK: To realize a virtuous cycle of growth and distribution, major stakeholders—including households, distributors, asset managers, asset owners, and companies—must function effectively and collaboratively. To this end, the Japanese government has already implemented various measures, such as introducing Japan’s Corporate Governance Code and Japan’s Stewardship Code to reform corporate governance. We have also developed the Principles for Customer-Oriented Business Conduct.

While significant improvements have been observed in several segments of the investment chain, we believe the asset management sector remains a critical missing link.

Therefore, in December 2023, JFSA launched a flagship policy aimed at stimulating the Japanese asset management sector, which the JFSA believes has enormous potential but is not yet functioning as it should.

PM47: In the investment value chain, which areas are the particular focus/responsibility of the JFSA?

JK: Promoting Japan as a leading asset management center involves engagement by the entire Japanese government. The JFSA is involved in every related policy measure to varying degrees.

For example, individual pension plans like iDeCo (Individual-type Defined Contribution Pension Plan) fall under the authority of the Ministry of Health, Labour, and Welfare. The Ministry of Finance is responsible for favorable tax treatment, and understandably, they are cautious about providing tax incentives without reliable alternative funding sources. Despite this, the Japanese government shares a common goal of ensuring the financial well-being of Japanese citizens in the long term.

Policies addressing financial and economic education, as well as the asset management sector, are of utmost importance.

PM47: Given the various policy measures that the JFSA has introduced, is it correct that the JFSA is welcoming foreign asset managers to enter business in Japan? What does the JFSA expect from foreign asset managers?

JK: The entry of talented asset managers into Japan’s asset management industry will stimulate competition, foster a more diverse and highly specialized talent pool, and drive the industry's overall growth. To encourage foreign asset managers to enter the Japanese market, the Japanese government has implemented measures such as establishing the Special Zones for Financial and Asset Management Business in Tokyo, Sapporo, Osaka, and Fukuoka, and launched the Financial Market Entry Office, which provides one-stop English support for the registration process to foreign asset management companies establishing a new base in Japan.

PM47: How successful have these measures been so far?

JK: Fortunately, efforts have shown tangible outcomes. Assets under management by asset management companies are increasing, and household financial assets are also on the rise. NISA (Nippon Individual Savings Account) accounts have significantly grown, with one in four individuals aged 18 or older now holding a NISA account (Statistics Bureau of Japan, 2025; Japan Securities Dealers Association, 2024). Corporate governance reforms in response to requests from the Tokyo Stock Exchange have also led to improved profitability and efficient use of capital.

Source: Japan Financial Services Agency

PM47: Please introduce what Japan is doing to improve financial literacy.

JK: Not many people feel they have been adequately educated in financial matters—whether in school, at the workplace, or in their communities. As a result, they often lack confidence in taking investment risks.

While promoting the asset management industry in Japan, we (the Financial Services Agency and related public sector organizations) are keenly aware of the necessity to provide high-quality financial education to Japanese citizens. This education is essential to protect them from potential losses, financial fraud, and emerging risks related to financial digitization. Based on this belief, we advocate long-term, diversified, and cumulative investment as a reasonably assured approach to asset formation for ordinary retail investors.

In the past, various efforts were made independently by different entities—government agencies, the central bank, and financial associations. However, to integrate and streamline these resources, we established J-FLEC (Japan Financial Literacy and Education Corporation) in April 2024, which began full operation in August of the same year. J-FLEC provides financial education to workplaces, schools, regional communities, and town halls from a neutral standpoint, free from influence by any particular party. They conduct free-of-charge seminars and events and dispatch lecturers to various locations. What is unique about J-FLEC is its certification system for financial advisors to ensure the neutrality and quality of the education provided.

PM47: In which areas has J-FLEC been successful, and in which areas does it need further work?

JK: It may be a little premature to assess the effectiveness of J-FLEC’s activities. However, given that Japanese retail investors didn’t engage in selling during a recent shock to the stock market, it may not be too much to say that our advocacy for long-term, diversified, and cumulative investment is beginning to resonate with Japanese households, especially among the youth. On the other hand, more work is needed, particularly in securing enough lecturers and advisors, especially in rural areas of Japan.

PM47: How is the Special Zones for Financial and Asset Management Business developing?

JK: Access to the Japanese financial market is improving. Local governments offer start-up support programs for foreign firms setting up their businesses and living in Japan, and in some cases, they provide subsidies to partially cover initial set-up costs. 

The government also offers programs to support financial instrument business license applications, compliance officer recruitment, visa applications, and even help find schools and hospitals for accompanying family members.

This program is offered in parallel with the Financial Market Entry Office (FMEO), which provides one-stop English support for the registration process for foreign asset management companies establishing a new base in Japan. While Tokyo, as a major metropolitan area, will attract many foreign asset managers, it is hoped that the government’s initiative will also contribute to the development of other regions, including Sapporo, Osaka and Fukuoka.

PM47: The changes to the Financial Instruments and Exchange Act allowing outsourcing of middle-back-office functions for investment managers is now in effect. What are the expectations from these regulatory changes?

JK: The purpose of this reform is to allow asset managers to focus on their core asset management operations by outsourcing middle- and back-office functions. Through this, we anticipate that the capability and diversification of asset managers in Japan will be enhanced by promoting new entrants.

In addition to these regulatory changes, from the perspective of foreign entrants, the industry is encouraged to abolish Japan-specific business customs, such as the daily calculation of investment fund values that were previously double-checked by both asset managers and trust banks. By removing such outdated practices, which may have served as barriers for foreign entrants, it is hoped to see an increase in the number of asset managers in the Japanese market.

PM47: What do you think are the next steps in growing the asset management business in Japan?

JK: The government’s goal is to ensure the lifelong financial happiness of Japanese citizens through financial services. It is believed that all possible measures have been taken but considering that the effectiveness of these measures is limited, fundamentally, we need to address broader issues to enhance the attractiveness of the Japanese capital market. This includes convincing foreign investors and financial institutions that the Japanese economy will grow sustainably.

Challenges such as an aging population, climate change, and the effective use of technology should be tackled. From my personal view, I am particularly interested in how we can harmonize our policy for promoting Japan as a leading asset management center with our fintech initiatives, including the use of artificial intelligence (AI). 

In March 2025, the JFSA published the first discussion paper on AI, based on a survey from various stakeholders. The survey revealed that Japanese people are relatively conservative about using AI in financial services. Given that the Japanese asset management market is being opened up, I hope foreign asset managers entering Japan will pay close attention to emerging risks associated with AI, such as hallucination.

While "human-in-the-loop" approaches are often recommended to mitigate these risks, implementing them can be costly, requiring expertise in areas like law, accounting, and finance.My wish for foreign asset managers is to ensure a good level of human oversight to protect Japanese retail investors, who are beginning to find the courage to invest their financial assets.