Building Prosperity: Japan’s ambition to become a world-class 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 as the ultimate goal is the 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 domestic asset management industry.

Introduction

The Financial Services Agency, Government of Japan (JFSA), has 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 former Prime Minister Kishida’s initiative towards revitalizing the Japanese economy through policy measures known as “the new form of capitalism”, the Japanese government has been taking various measures to achieve a “virtuous cycle of growth and distribution” in which Japan's household savings flow more into return-seeking investment, and the benefits of increased corporate values are returned to households, leading to further private sector investment and consumption.

Of particular point to note in relation to the asset management business, the initiative focuses on engagement by stakeholders in the investment value chain, including households, corporations, distributors, asset managers, and asset owners to encourage these dynamic.

Source: Financial Services Agency, 2025

We had the honor of interviewing Mr. Jutaro Kaneko, Deputy Commissioner for International Affairs of the JFSA, and 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 International Division of 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. Jutoaro 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, totaling approximately 2,200 trillion yen. However, a majority 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.

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

PM47: In each of the investment value chain, which area 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, Labor, 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 as a whole shares a common goal of ensuring financial well-being for Japanese citizens in the long term.
We can state 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, can we say that JFSA is welcoming foreign asset managers entering business in Japan? What does 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, we have implemented measures such as establishing the “Special Zones for Financial and Asset Management Business” in Tokyo, Sapporo, Osaka, and Fukuoka, and launching 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, our efforts have shown tangible outcomes. Assets under management by asset management companies are increasing, and household financial assets are also on the rise. Nippon Individual Savings accounts (NISA)  have significantly grown, with one in four individuals aged 18 or older now holding a NISA account. Corporate governance reforms in response to requests from the Tokyo Stock Exchange have also led to improved profitability and efficient capital use.

PM47: Please introduce what Japan is doing to improve financial literacy.
JK: The level of financial literacy among Japanese citizens is said to be not necessarily high. 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 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 digitalization. Based on this belief, we advocate long-term, diversified, and accumulative 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 Japan Financial Literacy and Education Corporation (J-FLEC) in April 2024 and it 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 I find unique about J-FLEC, compared to its counterparts in the US and UK, is its certification system for financial advisors to ensure the neutrality and quality of the education provided through J-FLEC.

PM47: In which areas have J-FLEC been successful, and in which areas do you think it needs 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 panic selling during recent stock market turmoil, it may not be too much to say that our advocacy for long-term, diversified, and accumulative investment is beginning to resonate with Japanese households, especially among the youth. On the other hand, we are aware that 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. For example, Local governments offer startup support programs, for foreign firms in setting up their business and living in Japan, and in some cases they provide subsidies to partly cover initial set-up costs.
The government also offers programs to support financial instrument business license applications, compliance officer recruitment, visa applications, and even helping 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 registration process to foreign asset management companies establishing a new base in Japan. While Tokyo, as a major metropolitan area, will attract many foreign asset managers, I hope 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 are now in effect. What is your expectation 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- or 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, we are encouraging the industry 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, we hope 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: Our goal is to ensure the lifelong financial happiness of Japanese citizens through financial services. We believe 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 aging, climate change, and the effective use of technology must 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.
Last month, the JFSA published the first discussion paper on artificial intelligence, based on a survey from various stakeholders. The survey revealed that Japanese people are relatively conservative about using AI in financial services. Given that we are opening up the asset management market, I hope foreign asset managers entering Japan will pay close attention to emerging risks associated with AI, such as misinformation generated by AI systems especially in cases where service providers directly reach retail investors with products like AI-based investment advice.
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 is for foreign asset managers 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.

https://www.fsa.go.jp/en/news/2025/20250304/aidp.html

Conclusion 

• The Government of Japan has been reaching out to various entities in the investment chain to encourage achieving a “virtuous cycle of growth and distribution” through an increased flow of Japan's household savings flow into productive investment.
• Measures taken include:
  1. Doubling Asset-based Income Plan,
  2. Corporate governance reforms, and
  3. Reform of Asset Management Sector and Asset Ownership
• The Reform of Asset management Sector and Asset Ownership which includes a new program to assist international entrants is the remaining piece for the growth of Japan’s economy and Japanese people’s asset income.