The Financial Services Agency has published an account of its assessments and strategic priorities for the coming year.

In the field of digitalisation, the regulator wants to protect financial customers' privacy and generally circumscribe the use of data by financial institutions with more rules. It also expresses a desire to facilitate 'innovation,' that vague stand-alone term that Western regulators use when discussing FinTech or RegTech, by means of the "FinTech Innovation Hub” that it set in motion last year. This method of bureaucratic support for FinTech initiatives and start-ups presumably runs along British lines. The aim of the hub is to support firms in their efforts to perform new financial services "through enhancing information gathering." New function-based, cross-sectoral regulations are on the way in this area.

Crypto-policy

Japan was the first country to recognise crypto-currency legally and is always (depending on the day) the second or third largest economy in the use of Bitcoin. Its major cryptocurrency exchanges are registered as financial service institutions and the Payment Services Act 2017 obliges them to obtain FSA licences. Last September the FSA made its screening process for risk-management procedures at these exchanges more stringent by issuing an order in accordance with the Act, doubling the number of questions to 400.

In January of last year Coincheck, a bitcoin wallet and exchange service, suffered the largest crypto-hack in history and the FSA put a stop to registering new exchanges as a consequence. It is thought to have resumed recently, but its operations are so opaque that this is not certain.

Japanese banks are also starting to use blockchain technology. Last year Japan Bank Consortium released a groundbreaking smartphone application called MoneyTap. Ripple helped to launch the app, which allows the bank's HNW customers to settle transactions instantly throughout the day, every day.

It its policy document, the FSA voices a desire to "take initiatives with crypto-assets." It wants to hold a "governance forum" (a tentative name), discuss distributed financial systems with interested parties and consider responses to "a new concept related to crypto-assets." Elsewhere it states, somewhat enigmatically, that "a new concept related to crypto-assets has also emerged." On a more concrete note, it promises to  establish a monitoring system and "self-regulatory function" for crypto-assets (virtual currencies) and help the Payment Services Act run more smoothly.

Reform of the FSA

The regulator wants to improve its performance from the perspective of people who use financial services. It wants to revitalise itself by making its staff more proactive and it aims to take a new approach to supervising firms, using its theme-specific reports.

Other initiatives

Governments, and therefore the regulators they employ, are marching in ever-closer lock-step with the international organisations to which they belong. Such an organisation is the 'G20' group of industrialised nations, which famously only has a membership of 19. In its communique from the Japanese city of Fukuoka in June, it declared: "We will address unintended, negative effects of market fragmentation, including through regulatory and supervisory co-operation." This seems to stem from a fear that, according to a G20 report of the same month, "markets may be fragmented along jurisdictional lines" and regulations in varying countries might "disincentivise or prevent market participants from undertaking certain cross-border activities." The very existence of regulations that differ from those in other countries, therefore, is anathema to the international body. The JFSA's policy document, citing G20 policy, promises to make Japan's financial regulations even more similar to those outside Japan.

The FSA also wants to monitor the financial stability of financial institutions, concentrating on the consequences of a decline in Japan's population and low interest rates. It aims to have a say in regional financial institutions' business models.