1) Japan has the third largest economy but faces challenges from an aging population and shrinking workforce. It has a high debt-to-GDP ratio and has relied on policies like lifetime employment and low interest rates. 2) The Financial Services Agency is Japan's primary financial regulator and is responsible for supervision of banks, insurance companies, and other financial institutions. 3) In addition to private banks, Japan has government financial institutions that promote specialized sectors. The postal savings system collects large deposits through post offices.

1. Group 1: Mansi Sawant (A017), Sahaj Desai (A031), Sagar Bondre (B010), Shreyash Kadam (B027), Ria Kalghatgi
(B028), Akshay More (B045), Amod Patel (B051), Ganesh Pillai (B052), Shiv Safi (B055), Bhagyashree Salvi (B057),
Abhishek Juriani (B073)
Japanese Financial Institutions &
Regulatory Policy Impact on Japan’s
Economy

2. Financial Status and Position of Japan
• Population of 127 M & is the 3rd largest developed economy
• The aging of Japan’s population and its shrinking workforce bring challenges.
• It has massive debt to GDP ratio
• Kieretsu – Monopoly power to the manufacturer
• Guaranteed life time Employment – Artificial Raising of salaries
• Low interest Rates – Yen Carry Trade
• Japan’s war trade with South Korea
• Economist fear recession/ slowdown like 2014 – Increase in consumption tax

3. Financial Services (Introduction)
Financial Services Agency (FSA) - Origin:
• Principal regulatory body
• Founded in 1998 as the administrative wing of the PM’s office
• Established as the official regulatory body in 2000 by the Financial Reconstruction Commission.
FSA – Role & Responsibilities:
• Primary financial regulator
• Inspection and supervision of Japan’s banks, insurance companies, trust companies and other obligated financial
institutions in accordance with Japanese and international laws
• Planning legislation and policymaking for Japan’s financial sector
• Inspecting and supervising financial institutions, public accountants, and auditing firms for ongoing compliance with
AML/CFT rules and financial legislation
• Establishing minimum standards for business accounting and corporate finance, and rules for securities trading
• Address the contemporary challenges of financial markets and respond effectively to threats

4. Regulatory Requirements in Japan
REVIVING GROWTH
ACHIEVING FISCAL
SUSTAINABILITY
REFORMING THE
TAX SYSTEM
● Broadening the direct
tax base while reducing
rates
● Shifting the composition
of taxes from direct to
indirect taxes
● Improving the local tax
system
● Increase Productivity.
● Limiting the decline in
labour supply.
● Japan’s public debt ratio
is a major source of
vulnerability
● A detailed and credible
fiscal consolidation plan

5. Japan Regulatory Policies
1. Tax Policy
Corporate tax rate reductions reduced below the 30% mark in FY2016 from previous 35 %.
The government raised the consumption-tax rate from 5% to 8% in April 2014.
Reduce property tax as for SMEs that make certain capital investments in robotics and cloud tools.
2. Trade Policy
Japan’s economic growth has been based on free trade.
Promotion of the export of Japan’s high-quality Infrastructure, Automobile to meet expanding global
infrastructure needs.
Strengthen investor confidence through transparency.
3. Research, Innovation and Infrastructure Policy
Supporting & Encouraging Innovative Ideas
Facilitate business partnerships between start-ups and universities.
4. Labor Market Policy
Equal pay for equal work between regular and non-regular workers to encourage higher motivation.
Promote a flexible work style:
Free education for infants.
Actively attract overseas professionals who have expertise or experience.
Enhance women’s participation and advancement.
5. Healthcare Policy
Faster R&D process in innovative medicine.
Implement faster approval system for pharmaceuticals, medical devices and regenerative medicine.
Regulatory bodies
in Japan
Ministry of Health,
Labor and Welfare
(MHLW)
Financial Services
Agency
(FSA)

6. Japan’s Financial System (Introduction)
JAPANESE FINANCIAL SYSTEM
BANKS
Accepts loan
Extends loan
Deals in Foreign Exchange
GOVT. INSTITUTIONS
Funds various sector of domestic
economy
Securities co. provides brokerage
services, underwrites corporates
SECURITIES & CAPITAL
MARKETS
Finance public & private debts

7. Japan’s Financial System (Govt. Institutions)
• Government financial institutions working in parallel with the private banking sector
• The Japan Export-Import Bank (JEXIM), the Japan Development Bank, and several finance corporations such as the
Housing Loan Corporation, promote the growth of specialized sectors in the domestic economy. Funding from deposits
collected by the postal savings system and deposited with the Trust Fund Bureau.
• The postal savings system, through the 24,000 post offices, accepts funds in various forms including savings, annuities,
and insurance.
• The post offices offered the highest interest rates for regular savings accounts (8% for time deposits in 1990) and tax-
free savings until 1988, thereby collecting more deposits and accounts than any other institution in the world.
• The Japan Bank for International Cooperation (JBIC) is the only government institution with an international focus, and
provides financing for trade between Japan and developing countries, thus performing the function of export-import
banks run by governments in other countries (including the United States), although its participation is possibly greater.

8. Japan’s Financial System (Banks)
PRINCIPLE REGULATORY IS THE FINANCE SERVICE AGENCY OF JAPAN (FSA).
i) The stability of Japan Financial System
ii) Protection of depositors, Insurance policyholder and securities investor
iii) Orderly financial operations
iv) Policy making concerning & planning the financial system
v) Inspection and supervision of private sector financial institute including banks
vi) Banking act enforcement order and Banking act including ministry of finance order no 10 of 1982 as amended
Central Bank: Bank of Japan is the Central Bank. Its jurisdiction has been established under the bank of Japan act and it
is not government governed. The main objective contribution is to maintain the stability of the financial system.
i) Issuing bank notes and carrying out currency and monetary control.
ii) Ensuring the smooth settlement of the fund among bank and financial institutions.

9. Japan’s Financial System (Securities)
Securities and Stock Exchange is the largest stock exchange in the world, handling over 80% of the stock
trades in Japan.
The Osaka Stock Exchange is the third largest in the world, just behind the New York Stock Exchange.
The most popular index is the Nikkei 225, compiled by the Nihon Keizai Shimbun (Japan Economic Daily.)

10. Financial Institutions in Japan

11. Securities & Exchange Surveillance Commission

12. Strategy & Policy of the SESC

13. Functions of the SESC
• The SESC aims to ensure the fairness and transparency of markets and to protect investors
through the following:
• Investigations of market misconduct including insider trading and market manipulation
• Inspections of violations in disclosure requirements by listed companies
• Monitoring of inappropriate practices by financial Instruments business operators
• Recommendations of administrative actions or administrative monetary penalty payment orders,
or filing criminal charges based on the results of the above investigations, inspections or
monitoring

14. Examples of Major Cases handled by the SESC
• Recommendations:
• $22 million (2.4 billion Yen) fine for Nissan for underreporting former chairman Carlos Ghosn’s
compensation from 2014-2018
• Administrative monetary penalty against Mitsubishi UFJ Morgan Stanley Securities Co. Ltd. for
market manipulation regarding 10-year Japanese Government Bond (JGB) Futures
• Criminal Charges Filed:
• Filing criminal charges of Insider trading of Dalton Corporation shares
• Policy Proposals:
• Information provision to investors in loan-type funds

15. Impact on Japanese Economy (1/5)
Healthcare expenditures on elderly in Japan are likely to increase even more from around 2022

16. Impact on Japanese Economy (2/5)
Japan's Trade Balance from 2010 to 2019

17. Impact on Japanese Economy (3/5)
Famous for its resistance to immigration, Japan opens its doors

18. Impact on Japanese Economy (4/5)
Japan has worst work-life balance

19. Impact on Japanese Economy (5/5)
Japan Economy Data

20. References
• https://www.imf.org/en/News/Articles/2018/11/27/na112818-japans-economic-outlook-in-five-
charts
• https://www.focus-economics.com/countries/japan
• https://www2.deloitte.com/us/en/insights/economy/asia-pacific/japan-economic-outlook.html
• https://www.thebalance.com/japan-s-economy-recession-effect-on-u-s-and-world-3306007
• https://www.fsa.go.jp/sesc/english/reports/reports.htm
• https://en.wikipedia.org/wiki/Japanese_financial_system
• https://en.wikipedia.org/wiki/Nikkei_225