Japan’s asset management industry has expanded dramatically in size and importance with the officially encouraged shift from a “savings” to an “investment” culture.
It is a revolution that is still ongoing and expanding, Yutaka Ito, commissioner of the Financial Services Agency (FSA), says in an interview with Asia Asset Management.
The agency is working hand in hand with the newly established Investment Management Association of Japan (IMAJ) to strengthen the country’s financial system and asset management capabilities.
“The asset management industry is a critical infrastructure that links economic growth with household wealth creation through capital provision and investor engagement,” Ito says. “I believe that if the industry continues to enhance its investment capabilities and develops in a sound and competitive manner, it can make a significant contribution to sustainable economic growth and greater prosperity in Japan.”
In December 2023, the government formulated a policy plan to promote Japan as a leading asset management centre.
“Since then, comprehensive initiatives have been advancing across the entire investment chain, including households, asset owners, asset managers, distributors, and corporations,” Ito says.
He pointed to the substantial enhancement of the Nippon Individual Savings Account (NISA) as a major example. Income gains and capital gains are tax-exempt for individuals under certain restrictions in the NISA.
An expanded “New NISA” was introduced in January 2024.
Ito says over seven million new NISA accounts have since been opened, raising the total number to more than 28 million as of end-2025, with cumulative investment reaching 71 trillion yen (US$446.43 billion).
“This indicates that household financial assets, which had long been dominated by cash and deposits, are finally beginning to shift towards investment.”
Since the introduction of the new NISA, equities and investment trusts held by households have risen nearly 40%, and household financial assets increased nearly 10%.
Meanwhile, households’ share of cash and deposits declined from 52.6% to 48.5%. Ito notes that this is the first time since 2007 the share has dropped below 50%.
At the same time, “rising interest rates and inflation have further highlighted the importance of investment for long-term wealth preservation”, he adds.
Governance reforms
On the asset owner side, initiatives such as the introduction of Asset Owner Principles two years ago have bolstered fiduciary awareness among asset owners, including pension funds.
This, according to Ito, “has increased demand for sophisticated investment management and investment advice by professional asset managers”.
Meanwhile, “corporate governance reforms have encouraged companies to engage more constructively with investors, leading to tangible changes in corporate behaviour and improvements in corporate value”.
But he says corporate governance and asset management reforms are far from complete.
“Over the next few years, it will be essential to continuously promote these positive developments. The asset management industry needs to continuously enhance its investment capabilities, firmly embed customer-oriented business practices and meet the expectations of investors,” Ito says.
“As part of our efforts to further upgrade asset management practices, we are also examining ways to streamline asset management infrastructure, including custody and operational systems, which have become too complex and costly, involving various stakeholders such as custodians and system vendors in a fragmented manner. Industry-wide initiatives are equally important when it comes to business practices.”
“If these efforts take root, a steady flow of funds into the asset management industry is expected, making Japan an attractive market for domestic and international asset managers alike.”
This is important for Japan, which has long been rich in terms of household financial assets but relatively poor in terms of the asset management skills needed to intermediate these savings into needed domestic investments.
Strategic growth areas
Prime Minister Sanae Takaichi’s administration has designated 17 strategic fields for future public and private investment. They include artificial intelligence, semiconductors, shipbuilding, quantum technology, aviation and space, digital and cybersecurity, energy security and green transformation, disaster prevention, nuclear fusion, critical minerals, port logistics, defence, next-generation information and communications, and marine technology.
“Stable provision of long-term capital by household assets will reinforce market foundations that support economic growth. Long-term money from households to industries and corporations will make the Japanese economy as a whole grow,” Ito says.
Public money will be provided first to finance the 17 sectors so that private capital is encouraged to follow.
According to Ito, the FSA “has been working to create an open and accessible market environment by lowering entry barriers through regulatory and operational reforms. We have a financial market entry office that handles registration examinations and ongoing supervision entirely in English”.
He says more than 50 new firms have registered over the past five years.
“We continue to hear requests for further regulatory simplification and expanded English language services. We will keep listening to global market participants to ensure Japan becomes an open and attractive base for global players,” he says. Four regions – Sapporo, Tokyo, Osaka and Fukuoka – have been designated as special zones for financial and asset management business, he adds.
“Blue ocean” of opportunities
Ito points out that apart from investment opportunities offered by major Japanese companies and government-proposed mega projects, there are myriad investible small and medium-sized enterprises, noting that there is a relative dearth of equity investment for small firms at present.
He says there is a “blue ocean” of investment opportunities in the Japanese equity market. “There are a lot of undervalued small companies here in Japan, and that could be a very good opportunity for investors from outside and from inside” the country.
Ongoing corporate government reforms, including increased financial transparency, should help attract both domestic and foreign investment into the entire spectrum of companies, while venture capital and private equity will also be instrumental.
Japan is also working to expand and accelerate development of its corporate bond market.
Ito says it was “very difficult” to promote corporate bond issuance during the long period when interest rates in Japan were zero, but now that ten-year coupon rates are around 2.4%-2.5%, “it’s a good time to develop the market”.
“It’s time for the security houses to invite the corporate bond issuers from the corporations.”
Ito notes that regulation of the crypto asset sector is also undergoing reform. A proposed new act has been submitted to the national Diet; he says the crypto assets regulatory framework will range from the Payment Services Act to the Financial Instruments and Exchange Act.
Newly unified industry group gears up to promote Japan
The newly-established Investment Management Association of Japan (IMAJ) is going to have to engage in multi-tasking, given the wide variety of challenges in promoting and guiding Japan’s asset management industry, which is growing in size and competence.
Yoshio Hishida, chairman of IMAJ, outlines some of these challenges in an interview with Asia Asset Management. They range from fostering an expanded international role for Japanese and foreign asset managers, to helping mould the industry to serve the needs of an ageing population.
Established last month, the IMAJ is the product of a merger between The Investment Trusts Association, Japan and the Japan Investment Advisers Association. The move reflects a more focused approach to development and regulation as Japan seeks to become an asset management nation.
By unifying previously separate industry bodies, Hishida says the IMAJ can engage effectively with international counterparts, although unlike many of these, it is a self-regulatory body with authority and rule-making capability over industry standards and practices.
The launch of the association “wasn’t simply integration [of existing agencies] but a natural progression [reflecting] societal changes and growing interest in asset development”, he says.
“That includes insight by the government, regulators, the FSA and also the growing importance of asset management, particularly in the [context of] environment and changing social issues.”
The IMAJ currently has 941 regular members and total assets under management of around 1,100 trillion yen (US$7 trillion) as of end-2025.
“We try to be an open association with diverse opinions and perspectives,” Hishida says.
“We intend to operate our association based on three pillars,” he adds.
“One is activities aimed at the sound development of our industry and secondly, activities aimed at enhancing our industry presence, both in Japan as well as globally.”
“Thirdly, as we are a self-regulatory organisation we need to strengthen those [regulatory] functions in order to protect investors.”
In order to help foreign investors understand Japan, he says the IMAJ plans to concentrate on information dissemination activities in collaboration with various other initiatives, including FinCity.Tokyo.
The association also intends to bolster collaboration with other entities in the investment chain, including distribution companies, asset owners, administration companies and service providers. It also plans to promote the use of cutting edge technologies, including artificial intelligence and data standardisation, and encourage the entry of new asset management firms.
– By Anthony Rowley
