Japan’s FSA sets ambitious growth targets as ‘Abenomics’ pursues renewed mandate
Japan’s Financial Services Agency has ambitious plans to more than double the proportion of foreign investors in Tokyo’s securities market by 2020. The plans are part of a wider shift linked to ‘Abenomics’, the government push to revitalise Japan’s economy.
Speaking at the Japan Securities Summit hosted by the Japan Securities Dealers Association and the International Capital Market Association in London, Shunsuke Shirakawa, commissioner at the FSA, said that the target for the Japanese market was to increase the trading of foreign stocks to 25% of total Japanese trading volume. The current figure is just 12%. Average daily stock trading on the Tokyo Exchange in 2014 were ¥2.9 trillion, meaning the target represents about ¥725 billion yen, or £3.98 billion every day.
“We believe that overcoming deflation and overseeing a growth strategy is essential for Japan,” said Shirakawa. “It may seem strange for a regulator to be overseeing a growth strategy, but this is important. We are accelerating structural reform, we have brought in a corporate governance code, we are working to improve the securities settlement systems, promote standardisation of bond issuance documentation and to encourage real-time money transfers by financial institutions and companies. This is all about sustainable economic growth.”
The reforms referred to by Shirakawa include the introduction of a stewardship code in November 2014, which was signed by 175 Japanese asset management firms, as well as changes to the Government Pension Investment Fund. They also include efforts to enforce International Financial Reporting Standards. Japan’s efforts on this front have been highlighted by Tak Ochi of the International Account Standards Board, which cooperates with the IFRS Foundation, an organisation that releases reports putting forward recommendations on best practice in financial services.
Much of the debate at the Japan summit focused on questions of corporate governance and macro-economics. Following the resounding victory of Prime Minister Shinzo Abe in December 2014, the government has a strong mandate to pursue its reform agenda – a point highlighted in a speech by Motoshige Itoh, professor of economics at the University of Tokyo. Meanwhile according to Atsushi Saito, chief executive at the Japan Exchange, a “mind shift” is taking place among Japanese asset managers, driven by ‘Abenomics’ – a mixture of fiscal stimulus, monetary easing and structural reforms designed to promote economic growth.
“Trading is at pre-crisis levels, and liquidity in Japan is second only to the USA,” said Saito. “New equity derivative products have been introduced and new participants are joining the market. But this is just the beginning. For 20 years, Japanese stocks didn’t appreciate because the use of capital in Japan was bad. We need capital efficiency and better governance in Japanese companies. The FSA’s code of conduct has been taken up by 175 asset managers – a sure sign of confidence and progress. I am optimistic about the future.”
The Japan Exchange has been seeking to grow its presence outside Japan, too. Last month, it launched a colocation service in collaboration with the Singapore Exchange, which creates a direct low-latency connection between Tokyo and Singapore. JPX has also opened a new office in Hong Kong, and been linked to ongoing plans to create a new stock exchange at Yangon in Myanmar.
