"Wake Up the 1 Quadrillion Won Sitting Idle": Japanese Government Signals Major Overhaul of Financial Regulations

[Financial News, Tokyo = Reporter Seo Hye-jin] The Japanese government is launching a sweeping financial reform drive to channel the huge amount of household deposits into the investment market. It has set a goal of raising the share of stocks, funds and bonds in household financial assets to 40% by 2040, while promoting a more active corporate bond market, expanding private-market investment and easing financial regulations.
According to Nihon Keizai Shimbun, or The Nikkei, on the 23rd, the Japanese government has included specific targets in a draft of its new financial strategy, which is scheduled to be released this summer, to accelerate the shift from savings to investment. The key goal is to increase the share of investment assets in household financial holdings.
As of the end of last year, Japanese household financial assets totaled 2,351 trillion yen, or about 22,400 trillion won, according to the Bank of Japan (BOJ). However, investment assets such as stocks, investment trusts and bonds accounted for only 23% of the total. By contrast, cash and deposits stood at 1,140 trillion yen, or about 13,338 trillion won, making up 48.5%.
The Japanese government has set a target of lifting the share of investment assets to 40% by 2040. Based on the current level, that would require roughly 400 trillion yen, or about 3,810 trillion won, in additional investment funds to flow into the market.
To that end, the Japanese government plans to overhaul the system for public funds that invest in unlisted shares and infrastructure assets. It also aims to broaden access for individual investors to growth industries and private assets, drawing on the European Long-Term Investment Fund (ELTIF) model.
It will also work to improve corporate financing conditions. The government plans to ease regulations on bond issuance and support asset managers in improving operational efficiency to expand the supply of investment products.
The policy is also linked to the Sanae Takaichi Cabinet's push to foster 17 strategic industries, including Artificial Intelligence (AI), semiconductors and the space industry. The government plans to form a consultative body involving the private sector and financial institutions to actively attract investment funds into strategic industries.
Bank investment rules will also be significantly eased. Authorities are considering partially relaxing equity investment restrictions, which currently cap holdings at 5% based on voting rights, so that banks can invest up to 100% in certain transactions such as management buyouts (MBOs).
A broader regulatory overhaul of the financial industry is also in the works. The government plans to submit revisions to the Act on Registration of Credit Business and Protection of Financial Users and the Insurance Business Act to the regular Diet next year. It is also reviewing possible easing of firewall regulation that limits information sharing between banks and securities firms.
The government is also moving quickly to prepare financial policies for the AI era. The Financial Services Agency of Japan plans to begin discussions on blockchain-based on-chain finance this summer, while also developing supervisory frameworks for financial markets and cybersecurity responses as AI spreads.
Market observers say the Japanese government is clearly trying to draw the household's "sleeping money" into the capital market and use it as funding for investment in growth industries.

sjmary@fnnews.com Seo Hye-jin Reporter