The Journal The Authority on Global Business in Japan

A robust financial system is an essential part of a healthy economy. As Japan’s comprehensive financial regulator, the Financial Services Agency (FSA) plays a critical role in shaping and supporting sustained economic growth, ensuring stability, and addressing a shrinking and aging population in a way that is consistent with the government’s growth strategy initiatives.

At the same time, the FSA must balance growth measures with prudent regulation and lessons learned from the 2008 global financial crisis. In today’s interconnected and occasionally volatile global financial market, the mission of the FSA has rarely, if ever, been more complex or vital.

Against this backdrop, the American Chamber of Commerce in Japan (ACCJ) was pleased to welcome Toshihide Endo, director-general of the FSA’s Supervisory Bureau, to speak at a special luncheon on February 2. Under Endo’s leadership, the Supervisory Bureau is responsible for monitoring the soundness of business operations at financial institutions, including banks, securities companies, and insurance companies.

Endo shared his vision and priorities for the agency, and described how the FSA secures financial stability and consumer protections in Japan. He also outlined the FSA’s international efforts to highlight the need for regulators to support the financial sector’s vital role in contributing to economic growth. The FSA’s approach has evolved over the years.

In 2012, the FSA announced four pillars for “Better Regulation,” which sought an optimal combination of rules-based and principles-based regulatory measures. Specifically, the FSA encouraged prompt and effective responses to high-priority issues, voluntary efforts by financial institutions, and enhanced transparency and predictability of regulatory actions.

In 2015, the FSA further adjusted its regulatory approach, as highlighted by the publication of Strategic Directions and Priorities. Through this policy document, the FSA identified three key strategic priorities essential to its mission success. Specifically, the agency aims to reform itself and its approaches, transform the flow of funds and help the accumulation of household assets, and support financial institutions in changing their business models and creating shared value with their customers.

Building on a review of its initial Strategic Directions and Priorities, the FSA has also begun the process of benchmarking its progress and is implementing measures to continuously improve and enhance the quality of its regulation and supervision.

Key among the FSA’s priorities is the “creation of shared value.” Endo described this concept as a virtuous cycle in which financial institutions provide high-quality financial services for the best interests of customers. This customer emphasis bolsters corporate productivity and enhances the household sector’s ability to realize steady asset accumulation, which in turn will broaden the corporate customer base and lead to increased revenue flows.

To foster a positive environment, the FSA is initiating in-depth dialogues with the senior management of financial institutions. The discussions focus on governance, performance goals and evaluation, and loan screening systems, among other issues. With the help of a newly introduced set of benchmark indicators, the FSA will continue working to promote financial stability and consumer protection while supporting economic growth.

Endo’s remarks highlighted the FSA’s innovative thinking about supporting sustained economic growth, ensuring stability, and addressing a shrinking and aging population. Dialogue with stakeholders in the financial services industry, including ACCJ members in attendance at the luncheon, can help the FSA put that thinking into action and provide momentum for the virtuous cycle of shared value.

Key among the FSA’s priorities is the “creation of shared value.”