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Financial Services Agency
Newsletter

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FSA

2022
July

No.227Monthlymagazine

Provisional
Translation

Contents
Conferences (P1-)
P1 Address by Minister of State for Financial Services SUZUKI Shunichi at the Annual
Meeting of the National Association of Shinkin Banks
P2 Speech by State Minister KIKAWADA Hitoshi at the Consultation Meeting Relating
to the Multiple Debt Problem and Consumer FinanceNotice (P4)P4 Message to the Market (Explanation of Recommendation for Administrative Monetary
Penalty Payment)

Policy Commentary Corner (P5-)
P5 Vanguard of Financial and Economic Education - Messages from Officials in Charge NAKAMURA Kaori, Strategy Development Manager
YOSHIDA Ryusei, Staff Member
Strategy Development Division
Strategy Development and Management Bureau
P7 Publication of the "Progress Report on Enhancing Asset Management Business 2022"
KUWATA Hisashi, Developing Asset Management Office, Strategy Development Division,
Strategy Development and Management Bureau
TAKINO Keeichi, Director, Asset Management Monitoring Office, Securities Business
Division, Supervision Bureau
P12 Report by the Financial System Council's Working Group on Corporate Disclosure
FUKE Hiroshi, Assistant Director
MIYAHARA Kaoru, Section Chief
Corporate Accounting and Disclosure Division, Policy and Markets Bureau

P15 Explanation of the FSA's LAN System - Environmental Development to Enable Officials
to Change Their Work Styles –MANBA Daisuke, Director, Information Technology Office,Resources and Management Division, Strategy Development and Management Bureau

JFSA‘s Major Activities in June (P17)⇐Access the online version here
https://www.fsa.go.jp/en/newsletter/index.html

Address by Minister of State for Financial Services SUZUKI Shunichiat the Annual Meeting of the National Association of Shinkin Banks
The National Association of Shinkin Banks held its

use of such means as business turnaround support by theannual meeting on June 24, 2022, and Minister SUZUKI

Council for Vitalizing of Small and Micro Enterprises

delivered opening remarks as follows:

and the Guidelines for Business Revitalization, etc. of
Small- and Medium-sized Enterprises.
〇 Promotion of sustainable financeTo rebuild Japan's economic society, which has beendamaged by COVID-19, and achieve its sustainablegrowth, in addition to support for local business
operators, it is urgently necessary to change its industrial
structure in line with climate change and address social
problems such as the widening of inequality and thedecreasing population.
Advocating "new capitalism," the government isseeking to achieve a virtuous cycle of growth anddistribution, solve social problems and establish a

Photo: Minister SUZUKI delivering a speech at theannual meeting of the National Associationof Shinkin Banks

sustainable economy.
As financial support is important for the promotion〇 Introductionof such objectives, expectations placed on the role of

Hello, everyone. I am SUZUKI

Shunichi, thefinance continue to grow.

Minister of State for Financial Services.

The FSA is pushing ahead with programs to promote

Thank you very much for inviting me to the annual
meeting of the National Association of Shinkin Banks.
From the bottom of the heart, I would like tocongratulate you on holding the meeting and say a few
words on this occasion.

finance that helps solve social problems, namely
sustainable finance. For example, the FSA is working
out• Disclosure rules pertaining to the issues of"sustainability" such as climate change andAlthough the Japanese economy is showing signs ofa recovery amid an easing of the tough COVID-19

human capital, and• Environmental

arrangements

such

as

the

situation, conditions that permit no optimism, such as

disclosure of its basis idea (draft) about financial

another spread of infections and further rises in crude oil

institutions'and commodity prices accompanied by the prolongation

including support for client companies.

responses

toclimatechange,of the Ukrainian situation, are expected to continue.
Under the circumstances, I appreciate Shinkin Banks〇 Investment in people

for their great efforts to support for many business

It is people who address the question of climate

operators, such as cuts in the burden of loan repaymentschange and solve social problems such as the declining

throughbirthratetheacceptance

of

their

requestsforpostponement.
I expect that Shinkin Banks will continue support for

1business operators to the best possible extent by making

and

aging

population

andinequality.

Investment in people, therefore, is the most importantinvestment.

The Grand Design and Action Plan for a New Formadvancetheestablishmentofenvironmentalof Capitalism, approved by the Cabinet recently, andarrangements such as studies to institutionalize theother initiatives call for a wage increase as a flow factor

practice of creating security interests for the entire

and a shift "from savings to investment" as a stock factor

operations of business enterprises at an early date. I

to promote investment in people.

would like to ask for Shinkin Banks' efforts to vitalize

In light of cash and deposits accounting for morethan half of household financial assets in Japan, shifting

local communities and solve problems by providing
refined services in response to individual needs.

them toward investment is considered to have thepotential of greatly expanding household financial assets.

〇 In closing

To work out a "plan to double the asset-based income

Last but not least, the FSA holds the Regionalof citizens" at the end of 2022, the government will

Banking Summit (Re:ing/SUM) to support regional

examine a wide range of measures including a drastic

financial institutions' efforts to establish sustainable

expansion of the Nippon Individual Savings Accountbusiness models and promote mutual understanding(NISA).

between parties concerned and share favorable cases, etc.

Shinkin Banks, while providing households withAt the last event I attended, discussions were held onmeans of savings through the acceptance of deposits, areain the vanguard of supporting their asset building

communities, such as "SDGs and ventures" andthrough the sale of investment trusts, among others. I"financial education and financial literacy" in addition to

would like to ask for Shinkin Banks' cooperation in"support for business operators.“

promoting investment in people and the distribution ofassets.

varietyofchallenges

surrounding

regional

From the next event, themes and contents will bearranged and examined so that as many Shinkin Bank
executives and officials as possible can take the rostrum.

〇 Efforts to solve regional problems
Regional financial institutions maintain a visible andI would like to conclude my speech by wishinglong-lasting presence for local business operators. In

everyone here much happiness and health and express

particular, Shinkin Banks are cooperative financial

my hopes for the Shinkin Bank industry's further

institutions that are deeply rooted in their communities

development.

and provide services based on people-to-people relations.
I understand that Shinkin Banks, under such aphilosophy, are dealing with a variety of local problems
in a bid to create a society where a sense of fellowship
between them and local people of various kinds isfermented.
These efforts enable financial institutions to gainclients' trust through close communication, enhance thesustainability of local economies by solving a variety ofproblems and lead to the improvement of their own
sustainability through an increase in their namerecognition and reinforcement of their customer base.
To back Shinkin Banks' efforts, the FSA will

Photo: The meeting in motion2

Speech by State Minister KIKAWADA Hitoshi
at the Consultation Meeting Relating
to the Multiple Debt Problem and Consumer Finance
On June 7, 2022, the 19th Consultation Meeting
Relating to the Multiple Debt Problem and Consumer
Finance was held with the attendance of State Ministerfor Financial Services KIKAWADA Hitoshi. The
meeting heard reports from ministries and agencies
concerned regarding the state of affairs, policy trends
and other matters pertaining heavily indebted people. At
the meeting, exchange of opinion was also held between
outside intellectuals (constituent members) and officials
from ministries and agencies concerned. Remarks byState Minister KIKAWADA are as follows:

Photo: State Minister KIKAWADA speaking
during the meeting

I am KIKAWADA Hitoshi, State Minister for
Financial Services. I appreciate the attendance of themembers, including Chairman Yamamoto. Thank youvery much. I would like to deliver a short address on thisoccasion of holding the 19th Consultation Meeting
Relating to the Multiple Debt Problem and Consumer
Finance.
This meeting was set up to examine policy measuresthat should be taken to address the problem of multiple
debts, including responses to new challenges, while
maintaining achievements made thus far, and has been
held biannually. Along with endeavors by constituent
members and other people concerned, government
ministries and agencies and local governments havebeen making joint efforts to solve the problem ofmultiple debts.
The number of heavily indebted people has been
almost leveling off in recent years. However, given the3*current matters of concern such as the state of COVID19 infections and the economic effects of rising crude oil
prices, I consider it important to carry out new
countermeasures, when necessary, while paying close
attention to the situation.
In addition, the legal age of adulthood was loweredin April, allowing 18- and 19-year-olds to conclude
contracts by themselves. To prevent consumer damageand excessive indebtedness, therefore, I think it isimportant to promote programs such as education andawareness-building publicity for young people andapproaches to the industries concerned.
Under the circumstances, government ministries andagencies will report to today's meeting about a summaryof inquiries for advice on multiple debts, responses to
new types of loan sharks referred to in reports on victims
and others, initiatives taken after the lowering the legal
age of adulthood, trends in measures to address
gambling addiction and so forth. I would like to ask
constituent members to present expert reports on thestate of affairs in their actual work.
In closing, I would like to say that it is important tosteadily carry out necessary measures in line withenvironmental changes of the multiple debt problem
accompanied by the COVID-19 disease, economic
conditions and so forth. To this end, I humbly ask you toprovide your knowledge and am looking forward
listening to unrestricted opinions from you today.

Photo: The meeting in motion

For agenda, etc. at the meeting on multiple debt, consumer loans and other issues, refer tohttps://www.kantei.go.jp/jp/singi/saimu/kondankai.html (Available in Japanese).

Notice

Message to the Market(Explanation of Recommendation for Administrative Monetary
Penalty Payment)
The Securities and Exchange Surveillance Commission (“SESC”)
posts explanation of recommendation that it has issued on its website as
an article titled “Messages to the Market."
The content of "Message to the Market" posted on June 27, 2022, is
as below.
* For the full text of “Messages to the Market," please access the
SESC's website at https://www.fsa.go.jp/sesc/message/20220627-1.html(Available in Japanese).

Recommendation for an administrative monetary penalty payment order against
market manipulation relating to shares of SPANCRETE CORPORATION
Based on findings by an inspection,
the SESC recommended on April 26,
2022 that the Prime Minister and theCommissioner of the FSA issue anadministrative
monetary
penalty
payment order.*(Figure) Summary of facts about violation[Summary and features of the case]
An individual subject to therecommended penalty engaged in aseries of online trading to mislead otherpersons into believing that the sale andpurchase of shares in SPANCRETECORPORATION were thriving and tocause fluctuations in their prices throughfive accounts under his or her name forthe purpose of inducing trading in them.
Principal means of trading for the
purpose of inducing other investors tosell and buy the shares:(i) Placing high-priced sell orders
before the start of daily trading toprepare for selling at high prices(ii) Simultaneous selling and buying of
the same shares at the same prices
through the individual's own
account to raise prices(iii) Raising prices of minimum trading
unit (100 shares in the case underreview)(iv) Selling shareholdings at high prices
The SESC, in close cooperation withJapan Exchange Regulation, constantly
keeps tabs on the securities market andconducts a strict investigation into any
unfair transactions that impair thefairness and health of the market.

*

For “Recommendation for an administrative monetary penalty payment order against market manipulation involving
shares of SPANCRETE CORPORATION " published on April 26, 2022, visit
https://www.fsa.go.jp/sesc/news/c_2022/2022/20220426-2.html (Available in Japanese).

4Policy Commentary Corner

Vanguard of Financial and Economic Education- Messages from Officials in Charge NAKAMURA Kaori, Strategy Development Manager
YOSHIDA Ryusei, Staff Member
Strategy Development Division
Strategy Development and Management Bureau
The FSA is promoting financial and economic
education through such measures as the publicity of
NISA*1 and publication of the textbook on financial andeconomic education for high school students.*2 Aninterview with officials in the vanguard of financial andeconomic education follows.

more strongly recognized.
As the other factor, the curriculum guidance for highschool education was amended in April this year to
upgrade and expand financial education in social studies
and home economics.
We receive favorable responses from adult persons
as well. In a class for university students, for example,
one of them said, "I have to listen to the lectures more
attentively because I did not study the contents in highschool."Q2: What are difficulties of financial and economic
education?

Photo: Manager NAKAMURA and YOSHIDA, a staff
member, of the Strategy Development Division
during the interview

Q1: Attention to financial and economic education is
growing. What is behind it?
[NAKAMURA]
Broadly speaking, I think there are two factors.
The cut in the legal age of adulthood, effective on
April 1, is one of them. Starting at 18, people canconclude various contracts by themselves without theirparents' consent. It is good but there are things theyshould keep in mind. For example, they cannot cancel
them when a trouble occurs.
People become adults both in name and reality upon
graduation from high school. The importance ofacquiring general financial literacy before graduation is

*1

5

*2

[YOSHIDA]This is my very
personal opinion, but
I think that "there isno answer" is themost difficult part.
There are various
courses of life after
graduation from highschool. Among school
students,
somealreadyhaveknowledge
aboutstocks while others
have never thought offamilybudgetmanagement and allowances.
In online financial and economic education held
recently for elementary school education, some
generally knew the contents, while others had neverheard of them at all. Aware of wide-ranging differences
between students, we rack our brains to preparematerials and contents of financial and economic
education.

For details of NISA, visit https://www.fsa.go.jp/policy/nisa2/index.html (Available in Japanese).
For the textbook on financial and economic education for high school students, visit
https://www.fsa.go.jp/news/r3/sonota/20220317/20220317.html (Available in Japanese).

We publish our guidance material of financial andeconomic education for high school students. For its use,
we hold talks with teachers in advance on questions suchas which parts of it should be emphasized instead ofusing it as it is. We try to make such confirmation
carefully on every occasion.
Q3: When do you feel a sense of accomplishment infinancial and economic education?
[YOSHIDA]
I feel a sense of accomplishment especially on two
occasions. First, I find my work worthwhile when
students say in post-education comments that "I could
learn special things we cannot learn in ordinary
education at school" or "It was meaningful to learn
finance and asset formation before entering the world ofwork."The second occasion is when we receive feedbacks
from ordinary people about "Unko Money Drill ('unko'means 'poo')" and other educational materials. Pamphlets
of " Unko Money Drill" went out of stock the other day
due to a flood of requests. As in such a case, I feel asense of accomplishment when strong public interest
directly gets through to us.

Our goal is not to buzz on social media but to let
everybody become financially literate. It is important for
us to continue current approaches, such as education andpreparation of educational materials.
Programs for adult persons are also important. I think
it is most difficult to deliver wide-ranging contents offinancial and economic education to adults who havecompleted school education.
As it is difficult for the FSA alone to do so, I think
we have to address the issue with support from not only
financial institutions but also many other concerns.
[YOSHIDA]
I wanted to do more in terms of publicity using the
FSA's mascot character, "Tsumitane Waniisa." I hope tomake the Tsumitate NISA and Waniisa a little more
widely known.

Q4: The final question is about the future developmentof financial and economic education.
[NAKAMURA]
It
ishighlyappreciatedthatfinancialandeconomic education issomehowboomingthese days.
We are drawing
attention as people
say the FSA is doing
this and that. Assetformation is taught at
high school, and bla
bla bla.
I think we have to
be careful not to let
the attention end as a temporary phenomenon.

* A video of the Tsumitate NISA is available at the FSA's
official website on YouTube. For details, visit
https://youtu.be/VgvLlkWR3yM (Available in Japanese).

6Policy Commentary Corner

Publication of the "Progress Report on Enhancing Asset Management
Business 2022"
KUWATA Hisashi, Developing Asset Management Office, Strategy Development Division,
Strategy Development and Management Bureau
TAKINO Keeichi, Director, Asset Management Monitoring Office, Securities Business Division, Supervision Bureau

On May 27 this year, the Financial Services Agency(FSA) published the "Progress Report on Enhancing
Asset Management Business 2022."* Given below is aninterview with the FSA staff members who were
responsible for preparing the report.

report because of our wish to promote industry-wideawareness, including among all asset management firms
and sales companies, so that we can create anenvironment that encourages sound competition across
the Japanese asset management industry to enhanceinvestment capabilities.
Question 2. You prepared a report last year as well.
What is new and distinctive about the newreport compared with last year's report?

Photo: Director KUWATA of the Developing AssetManagement Office (right) and Director TAKINO of
the Asset Management Monitoring Office (left)

Question 1. The Progress Report on Enhancing AssetManagement Business 2022 has beentaken up in various media reports. Whatis the purpose of the report?
[KUWATA]The message of the report is that asset management
firms must be always conscious of customer-oriented
business conduct. As we believe that, in the investment
chain, asset management firms play a very importantrole as a bridge between households and investee
companies, we hope that the report will be a catalyst for
vigorous discussion on practicing customer-oriented
business conduct.
[TAKINO]
This is the third progress report to be published. First,
discussions were held within the FSA on how to ensurethat the monitoring results regarding challenges in theway of enhancing asset management firms' investment
capabilities are reflected in individual firms' activities
and industry-wide awareness. We prepared the progress

7*[KUWATA]
Broadly speaking, there are three major points. First,
the new report for the first time disclosed the results ofperformance estimation regarding individual products.
With respect to product origination, delivery andmonitoring (product governance), the data presented
there revealed various challenges. To resolve thechallenges, we will continue dialogue with asset
management firms.
Second, after a survey on
the actual situation that
continued for around half ayear, the FSA for the first time
set out its expectations for
asset
management
firms
handling ESG funds. We hopethat asset management firms
will exercise creativity to
improve their activities toaddress the challenges.
Third, the new report for
the first time disclosed the results of a sample survey
concerning structured bonds and, at the same time,
explained in detail the product characteristics of andchallenges for structured bonds. As customers' inquiries
about structured bonds are increasing, we plan tocontinue our analysis.

[TAKINO]
From the viewpoint of dialogue with asset
management firms in particular, while we continued to
discuss matters such as individual firms' management
structures and business administration systems until lastyear, we wanted to hold more in-depth discussions on

As for the "Publication of the Progress Report on Enhancing Asset Management Business 2022," released on May 27,
2022, access the following site: https://www.fsa.go.jp/en/news/2022/20220527.html.

whether those structures and systems are functioning
effectively and whether product quality management
covers all funds. This time, in cooperation with theDeveloping Asset Management Office, we analyzed
individual funds whose performance was considered tobe sluggish in the medium to long term, presented theanalysis results to the firms, and discussed specificallywhat actions they were taking. We have the sense that
we discussed with the firms problems related to theeffectiveness of product governance that remained
invisible despite the monitoring of their management
structures.
Question 3. About what points did you take particularcare (what problems did you have) when
preparing the report?
[KUWATA]First, we considered how to reach out to generalinvestors. This year, in addition to a document in theusual presentation format, we prepared a document in
the report format. As this made it possible to provide
more meticulous explanations, it became easier to attract
the attention of not only industry officials but also
various media organizations. We hope that the reportwill be examined from various viewpoints and thatnecessary information will reach general investors as
well.
We also took care about disclosure of raw data.
Usually, only a limited group of people are given accessto data prepared by data supplier companies. However,data containing actual names that had been collected
through a commissioned survey was published on the
FSA's website by courtesy of the data supplier company
that had prepared the data. We hope that the data will be
useful for your analysis.

[TAKINO]
Although this is not
something limited to the
preparation of the report, we
took care to ensure that thecontents of our dialogue andreports are satisfactory formonitored firms as well. We
would like to make the reportconducive to ongoing dialogue
and useful as a reference forfirms other than the monitored
ones by presenting examples
of individual firms' activities
and the results of actual
dialogue based on data.

Question 4. Please give us an outlook on future
activities to enhance asset management
capabilities.
[TAKINO]Our goal is to create a virtuous cycle (developing a
win-win situation) in which asset management firms
achieve good performance and the Japanese people's
assets increase, leading to an increase in the amount ofassets under management and to stable profits at asset
management firms that have gained public trust, and as aresult, the firms further enhance their investment
capabilities. We would like to continue to deepen
dialogue with asset management firms.

Photo: Asset Management Monitoring Office: (From left)DAIJO (staff member), SUZUKI (Section Chief),
TAKINO (Director), NAKAGAWA (Coordinator), andYASUNO (Senior Director)[KUWATA]To enhance asset management capabilities, it isimportant not only for asset management firms but also
for sales companies and asset owners to play theirrespective expected roles. While we took up structured
funds, fund wraps and pension funds as points ofdiscussion at this time, we will continue to hold dialogue
with relevant organizations, conduct surveys andanalyses and communicate information on the FSA's
perspectives.

Photo: Developing Asset Management Office: (Fromleft) SUGIMOTO (Deputy Director), HARA
(Deputy Director), KUWATA (Director), and
MATSUMOTO (staff member)8

Policy Commentary Corner

Summary of the "Progress Report on Enhancing Asset Management
Business 2022"
In May this year, the FSA published the "Progress
Report on Enhancing Asset Management Business2022."* The report takes an in-depth look at thechallenges that asset management firms need toovercome in order to promote business management thatputs client interests first and to enhance investment
capabilities from three viewpoints—the management
structure, product origination, delivery and monitoring(product governance), and visions and strengths. At thesame time, regarding publicly offered ESG-related
investment funds (hereinafter referred to as "ESG
funds"), which have increased in recent years, the report
set out "supervisory expectations for asset management
firms providing ESG funds" based on surveys andanalyses conducted by the FSA. Among other items
taken up in the report are fund wraps, structured bonds,
and asset owners (pension funds). Below, the key pointsof the report are explained briefly.
1. Business management that puts client interests
first
In order for asset management firms to achieve goodinvestment performance over the long term and establish
a stable revenue base supported by customers, it isnecessary for them to develop an organizationalframework and implement initiatives that give top
priority to client interests. From this perspective, the
FSA had dialogues with asset management firms inJapan and their parent companies regarding the progressof their initiatives. In order to put client interests first andstrengthen investment capabilities, asset management
firms need to let their governance framework function

properly and to make improvements and enhancementon the following three points: "1. Management
structure," "2. Product origination, delivery andmonitoring ('Product Governance')," and "3. Clear
visions and strengths."(1) Management structure
We expect that senior management of asset
management firms, including independent directors,
responsibly instill the idea of client interest firstthroughout the organization and implement appropriate
frameworks of governance and business administration.
In particular, the report focuses on ensuring
independence as an asset management firm, amanagement structure focusing on expertise ininvestment management, and expected roles of
independent directors.
(2) Product origination, delivery and monitoring(product governance)
In order for asset management firms to conductbusiness administration that gives top priority to clientinterests, it is important for them to establish a productgovernance framework that controls the quality of
individual products from the perspectives of "whether
their products truly meet investors' needs and provide
them with stable long-term returns," "whether theirproducts are managed as envisioned at inception andgenerate returns commensurate with costs borne byinvestors," and "whether the investment strategies
planned at the time of inception are maintained."(Figure 1) Initiatives to give top priority to client interests and strengthen investment capabilities

9*

As for the "Publication of the Progress Report on Enhancing Asset Management Business 2022," releasedon May 27, 2022, access the following site: https://www.fsa.go.jp/en/news/2022/20220527.html.

(3) Clear visions and strengths
Asset management firms should differentiatethemselves from others by focusing on their corecompetencies, acting creatively in their areas of focus,
and realizing their own visions. The report also mentions
the importance of the due diligence of outsourced fundmanagers, performance evaluation and compensation
systems for realizing visions, and initiatives to improve
operational efficiency.
2. ESG funds
Amid the global spread of efforts toward carbon
neutrality, ESG funds that have been newly establishedin succession are attracting attention. On the other hand,
there are concerns that funds proclaiming environmental
considerations may be misleading investors as theirinvestment processes actually do not give consideration
to the environment. This is an example of so-called"greenwashing." Therefore, since November 2021, the
FSA has conducted a survey of 225 ESGs funds handled
by 37 domestic asset management firms on theirorganizational structure, positioning of ESGs
investments, investment strategy and processes,
engagement, and disclosure.
Regarding the situation of ESG funds in Japan, the
FSA found through the survey that at around 40% of theasset management firms surveyed, there was no ESG
expert. There were also cases in which asset
management firms depended on individual fundmanagers adept in ESG and failed to develop systematicinvestment processes. Moreover, regarding disclosure,there was no case in which an asset management firm
provided sufficient explanations as to how they reflect
individual companies' ESG factors in investment
decisions or whether they analyze the potential for a
future increase in enterprise value.
In light of the results of the survey and analysis, thereport set out the FSA's expectations for asset
management firms handling ESG funds. When asset
management firms state that they take into consideration
the ESG factors in their explanations about productcharacteristics and investment processes in productbrochures for investors, the FSA believes that it isimportant for them to pay attention to the seven-point
expectations and make improvement efforts. In addition,asset management firms should continuously enhancetheir investment processes and approaches and make
explanations and disclosures in accordance with theactual circumstances of the investment processes and in
a consistent manner so that customers can makeappropriate investment decisions. Going forward, the
FSA will continue dialogue with asset management
firms based on the FSA's viewpoints and thoughts

reflected in its expectations.
3. Other Issues
Here, explanations are provided about the analysis
results and challenges related to equity exchangeablebonds (EBs), which account for a portion of overall salesof structured bonds.
The redemption value of EBs is linked to the pricesof specific equities due to the knock-in mechanism whenthe equities concerned record price drops larger than theprescribed rates, and therefore, EBs are prone tosignificant losses when the prices of the stocks
concerned drop steeply. On the other hand, EB's upside
returns are limited because they are redeemed at facevalue at the time of stock price rises due to the knock-out
mechanism. Indeed, among the samples examined in the
FSA's analysis, there were cases in which 80% of theprincipal value was lost in only three months. Since therisk-return ratio of EBs is inferior to that of equities
while the correlation of EBs with equities is strong due
to the product characteristics, there is almost no
justification for purchasing EBs instead of equities.
Therefore, it is important for financial institutions andindustry associations to enable customers to purchaseEBs based on an accurate understanding of the productcharacteristics by enhancing the provision of information
through measures such as voluntarily collecting andpublishing data related to structured bonds periodically.

4. Conclusion
In order to achieve sustainable economic growth bydealing with various changes in the economy and society,such as increasing geopolitical tensions and the spread of
COVID-19, it is important that each participant in theinvestment chain fully plays its expected role to achievea virtuous cycle of funds. We hope that the report will be
helpful in that respect and intend to strive to resolve thechallenges through dialogue with a broad range ofstakeholders, among other activities.

Photo: MATSUMOTO (left) and DAIJO (right),
staff members on whose shoulders the
FSA's future rests.

10

(Figure 2) Supervisory expectations for asset management firms providing ESG funds(References)11• "Progress Report on Enhancing
Asset Management Business 2022"(Complete Version)• A commissioned survey: "Survey
on Investment Performance of U.S.
and European Open-End Funds"• A commissioned survey:"Measurement of Representative Key
Performance Indicators (KPI) of
Investment Performance of Domestic
Asset Management Firms andAnalysis of Various Points of
Discussion Regarding Domestic
Publicly Offered Investment Trusts"• A commissioned survey: "Survey
on Circumstances Surrounding
Corporate Pensions"Policy Commentary Corner

Report by the Financial System Council's Working Group on
Corporate Disclosure
FUKE Hiroshi, Assistant Director
MIYAHARA Kaoru, Section Chief
Corporate Accounting and Disclosure Division, Policy and Markets Bureau
In June 2021, the need to deliberate ideal forms ofcorporate disclosure was raised at the General Meetingof Financial System Council, and deliberations wereconducted by the Working Group on Corporate
Disclosure (chaired by Professor KANDA Hideki at the
Department of Legal Affairs of Gakushuin University
Law School) on nine occasions in total from September
2021. A report compiling the results of the deliberations
was published* this June. The developments of thedeliberations and key points of the report are introduced
below.
1. Developments
Amid system reforms in response to the previous
report by the Working Group on Corporate Disclosure,disclosure of narrative information has been improved inparticular through dialogues between companies andinvestors and facilitation of disclosure practices, andcorporate disclosure has thus been becoming more andmore useful. When observing recent economic and social
circumstances surrounding corporate disclosure, thesignificance of sustainability in corporate management
and investors' investment decisions has rapidly come tobe recognized and discussions on corporate governancehave become active. Furthermore, in deliberations
toward the achievement of Prime Minister Kishida's newcapitalism, it is necessary to consider ideal forms ofcorporate disclosure from the perspective of facilitating
fulfilment of capital market functions while at the sametime further developing capital markets in light ofinternational trends. Based on such awareness, theWorking Group on Corporate Disclosure conducted
deliberations broadly on corporate disclosure and madethe following recommendations.

Summary of Report by the Working Group on Corporate Disclosure of the Financial System Council
 The Working Group on Corporate Disclosure has discussed enhancing disclosure of non-financial information and improving
efficiency of disclosure in light of recent changes in economic and social circumstances. The summary below is based on thediscussions.

(Matters of Financial Instruments
and Exchange Act’s revision)

Non-financial informationNew Sustainability
Enhancement

Financial information
Annual Report
Q3

Q2

Q1

General A new section for disclosure of sustainability information will be created• “Governance” and “Risk Management” will be disclosed by all issuers.
• "Strategy" and "Metrics and Targets" will be disclosed under materiality
judgement by an issuer.
Human capital "Human resource development policies" and "Policies on improving workplaceenvironment" will be added to disclosure items.
Diversity
 "Gender pay gap," "Ratio of women in managerial positions," and "Ratio of maleworkers taking childcare leave" will be added to disclosure items.

 Corporate
GovernanceCorporate
Governance(Matters of Cabinet Office Ordinance’s revisions)Improving efficiency of
disclosure(Statutory)

Sustainability

Enhancing non-financial disclosure

Annual Securities Reports

Quarterly
Securities
Reports

Quarterly
Earning
Reports(Statutory)(Exchange Rules)

Integration
Quarterly
Earning
Reports(Exchange Rules)

Functioning of the Board of Directors
 A new section for disclosure of activities of the Board of Directors, Nomination
Committee, and Remuneration Committee will be created.
Revision of Quarterly Disclosure System The quarterly disclosure requirements under the Financial Instruments andExchange Act (Q1 and Q3) will be abolished and integrated into quarterly
earning reports based on the Exchange Rules.
 Continue discussions on issues for materializing the integration, such as
consideration regarding disclosure obligation, content of disclosure, enforcement
against false statements and review by audit firms.

(Note) In addition to the above, clarification of disclosure requirements for material contracts entered into by companies with other parties, and promotion of disclosure in English havebeen also summarized.

*

For the news release on June 13, 2022, "Publication of the Report by the Working Group on Corporate Disclosure of the
Financial System Council," see the following: https://www.fsa.go.jp/singi/singi_kinyu/tosin/20220613.html (Available inJapanese).

122. Disclosure of companies' initiatives concerning
sustainability(1) General
Initiatives concerning sustainability have become
central challenges in corporate management and havebeen attracting increasing interest from investors
globally. At the same time, establishment of standards
for disclosure of sustainable information and active
utilization thereof are rapidly progressing.
Under such circumstances, also in Japan, it isnecessary to position sustainability information as major
items for corporate disclosure and to make constantefforts to enhance the content of the disclosure.
In order to respond to these requests, the Working
Group recommended the creation of a new section toenter sustainability information in annual securities
reports, wherein information on "governance" and "riskmanagement" is to be disclosed by all companies andinformation on "strategy" and "metrics and targets" is tobe disclosed under materiality judgement by individualcompanies.

(2) Human capital and diversity
In deliberations toward the achievement of Prime
Minister Kishida's new capitalism, the significance ofinvestment in human resources is emphasized. Human
capital and diversity are recently attracting the attentionof institutional investors as information relating tocorporate value on a long-term basis, and are included indisclosure items under multiple international frameworks
for disclosure of sustainable information. Accordingly,
information on human capital, including initiatives
concerning diversity, has come to be disclosed recently.
In light of these trends, from the perspective ofproviding information necessary for investors'
investment decisions, the Working Group recommended
adding "human resource development policies" and"policies on improving workplace environment" as
disclosure items to be entered in the strategy section forsustainability information, and also adding the "ratio of
women in managerial positions," "ratio of male workers
taking childcare leave," and "gender pay gap" as
disclosure items, and putting these newly added items inline with other legal definitions and frameworks inconsideration of burdens on companies, etc.

Disclosure of Companies' Initiatives concerning Sustainability (Summary) The following should be entered in the sections of "idea and initiatives concerning sustainability" and "status of
employees" in annual securities reports.
Idea and initiatives concerning sustainability [new]Governance

Strategy

All companies

Common tosustainability
information

ClimatechangeHumancapitalanddiversity

Matters concerning
governance (to bedisclosed)

Risk management

Metrics and targets

Matters concerning
strategy

All companies

Matters concerning
metrics and targets

to be disclosed undermateriality judgement by
individual companies

Matters concerning risk
management(to be disclosed)

to be disclosed undermateriality judgement by
individual companies

When the relevant information is material, it should be disclosed under any of the frameworks of"governance," "strategy," "risk management," or "metrics and targets."

Based on the ISSB standards, the Sustainability Standards Board of Japan (SSBJ)
deliberates individual disclosure items.
When the relevant information is material, it should be disclosed under any of the frameworks of"governance," "strategy," "risk management," or "metrics and targets."
All companies+

Human resource
development policies
Policies on improving
workplace environment

Status of employees
Matters currently entered(Number of employees, average age, average service years, averageannual salary)

All companies+
Measurable metrics(Input/Output)
Targets and progress

Quantitative information should becomplemented with qualitative
information as necessary.
・Ratio of women in managerial positions
Addition ・Ratio of male workers taking childcare leave
・Gender pay gap

Cross-reference
as necessary

-0-

13

3. Disclosure concerning corporate governance
As of April 2022, companies with a nominating
committee and a compensation committee accounted forapproximately 80% of all companies listed on the Prime
Market of the Tokyo Stock Exchange, and the Corporate
Governance Code was revised again in June 2021. Inline with these moves, investors have come to show
higher interest in how boards of directors, etc. arefulfilling their functions.
Information on activities of boards of directors, etc.
has come to be disclosed in corporate governance reports
in Japan and has been disclosed in detail in legal
documents in the United States, United Kingdom,
Germany, France, etc. Accordingly, the Working Group
recommended the creation of a section to enter activitiesof the board of directors in annual securities reports,
wherein frequency of holding meetings, major agendas
and attendance of individual members are to be disclosed.
4. Frequency and timing of disclosure, including
quarterly information disclosure
The issues concerning the new capitalism and therelation between corporate management and quarterly
information disclosure are being discussed actively froma mid- and long-term perspective.
Regarding current practices, it is pointed out thatquarterly securities reports based on the Financial
Instruments and Exchange Act and quarterly earnings
reports based on the Exchange Rules contain overlapped
content and the timings of their disclosures are close toeach other. The Working Group suggested that it may bepossible to reduce cost and improve efficiency throughthe integration of these documents by devising
enforcement strategies.
Integration may be achieved either by consolidatingthem into quarterly securities reports or into quarterly
earnings reports, but the Working Group concluded that
consolidation into quarterly earnings reports would beappropriate in consideration of the following:
consolidation into quarterly securities reports, which are
published later than quarterly earnings reports, may
decrease the usefulness and timeliness of disclosed
information; quarterly earnings reports, by which
information is actively disclosed to investors, are broadly
utilized by investors; it is also important to encouragecompanies to take a positive stance toward information
disclosure; and some point out that it may also possible
to ensure disclosure not in the form of quarterly
securities reports but by any other alternative methods
from the perspective of securing accuracy. Specifically,

the Working Group recommended abolishing the legal
obligation of quarterly information disclosure (the first
and the third quarters) currently imposed on listedcompanies and integrate them into quarterly earnings
reports based on the Exchange Rules.
5. Other individual problems concerning disclosure
Additionally, the Working Group recommended thattypes of material contracts and concrete content thereof
to be disclosed in annual securities reports should beclarified and that information disclosure in English
should be conducted with regard to items that are highly
used in particular.
6. Conclusion
Based on these recommendations, the FSA will workon developing systems for disclosure of information
concerning sustainability and corporate governance, withthe expectation that the development of the environment
for facilitating corporate disclosure and constructive
dialogues between companies and investors will lead tothe creation of capital markets that will bring about midto long-term improvement of corporate value. The
Working Group needs to continue deliberations onchallenges concerning the creation of a roadmap,
clarification of the roles of the SSBJ, and integration ofquarterly securities reports into quarterly earnings
reports, all of which will contribute to practicalpreparation of companies and investors for starting
disclosure of sustainability information.

14

Policy Commentary Corner

Development of the FSA's Local Area Network (LAN) System- Encouraging staff’s flexible work-styles –MAMBA Daisuke, Director, Information Technology Office,Resources and Management Division, Strategy Development and Management Bureau
This article will explain the FSA's LAN system, i.e.,the core IT infrastructure system for internallyexchanging and sharing work-related information.
We launched the latest FSA's LAN system in January
2020. While its predecessor system started operation in
January 2014, the FSA started designing the latest
system already in 2016, with the prospect that the server,
peripherals and software would have become obsolete.
When developing the latest system, the FSA aimed at
not only updating equipment and software, including OS,
but also implementing new functions contributing tomore efficient operation and as well as diverse workstyles and other functions contributing to more resiliencein cyber-security, in light of an increased number of staff
working remotely. In doing so, we held briefing sessions
for, invited comments from, and conducted survey on all
FSA staff members, and organized workshops to letthem undergo its development of contents using a
prototype in order to reflect, to the extent possible, users’
feedback in the system.
〇 Development of infrastructure for remote work
Portability of a user device would be a key to let eachstaff freely choose her/his work-style.
Therefore, the FSA adopted compact laptops (with 13.3
inches display) that were considerably lighter and easierto carry around. We added remote access functions tothese laptops so that any staff can access internal filestorages on shared drives from their home and otherplaces outside the office.

15

Photo: Author

Furthermore, the FSA has installed wireless LAN in
the office and meeting rooms which enable staff toorganize meetings anywhere in the office and edit
documents on the spot by only bringing their laptops andusing displays there. Consequently, we were successful
in reducing the number of paper-based meetings.
It is also important to ensure cyber-security, in order
to allow staff to work remotely. Therefore, we adopted
biometric authentication when staff log on their laptops,
thereby reducing the risk of password leakage. The
laptops are now equipped with a function toautomatically erase data, so that information on a laptop
is immediately disappeared when it is turned off. Data
are saved only on the internal file storage rather than oneach device. Accordingly, even if a staff accidentally left
her/his laptop somewhere and someone else attempted tolaunch it, that person cannot access any businessinformation.

〇 Enhancement of communication tools
The latest system enables staff members to use a chatfunction, in addition to conventional emails, for theirinternal communications. The chat app also provides
informationonastatusofcolleagues’
presence/availability. Additionally, online meeting tool
makes it possible to easily shift from a (bilateral) chat toan online meeting, which can be organized both in andoutside of the office building.
As its timing of the introduction of the latest systemhappened to coincide with the first wave of COVID-19,
we were only able to prepare one online meeting tool at
an initial stage. As the number of online meetings has
increased, we have increased the number of available
tools as needed.
As the COVID-19 continued to spread and thepercentage of staff members working remotely increased,
we have broadened the lines connecting between the
LAN and the outside. Considering that some staff were
not necessarily required to come to the office given thenature of their work, and from a quarantine point of view,which contributes to business continuity as well as
staff’s health management, the Information Technology
Office (the Office) split all staff members into twogroups, i.e., groups A and B. During this split operation,
one of the two group members conducted remote work
every other day in turn and we found no disruption was
found in our services. While I suppose that thanks to its
business nature of the Office as an IT department,
shifting to remote working was relatively easier rather
than other departments, the overall percentage of remoteworkers in the FSA was considered to have remainedhigh.
In June 2020, the Office introduced a shared desk
policy, under which any of our staff can change desks,
accompanied by an office renovation so that staff
members can effectively maximize the benefits ofservices and tools I have mentioned above. Paper
documents and materials were tidied up and the officeroom became brighter with letting daylight in from
windows.
Furthermore, we added project management function
to groupware so as for members to share information
with colleagues across the divisions being invited to
discuss any of specific topics. With this function, staff
members are now able to communicate more freely andactively, and the visibility of its progress of individualtasks to the assigned project members has been increased.
〇 Introduction of BYOD
Thanks to the latest LAN system, the infrastructure
for online meetings with external counterparts has beendeveloped and staff members can do almost the same
work regardless of in the office or from home. In
addition, we introduced a Bring Your Own Device(BYOD) program in March 2021 to enable all staff
members to check emails, arrange schedules, and bookmeeting rooms in spare time without launching theirlaptops, and also to make/receive a phone call to/fromexternal related parties by using her/his own device andexternal lines during remote work.
The BYOD is used by downloading a dedicated app
in staff‘s private smartphones. This app enables staff
members to access the FSA's internal website and makebusiness phone calls whose costs are covered by theagency. All staff members can install this app by filingan application and individual telephone numbers only forbusiness use are allocated to each of them.
As described above, the Office has endeavored todevelop a system infrastructure to enable staff members
to change their work-styles flexibly. As we believe there
should be a room for further enhancement, we willcontinue listening to their needs of the FSA
staff members, who are users of the system, and making
efforts to development and operation of the system more
effectively.

Photo: Office room of theInformation Technology Office16

JFSA's Major Activities in June
(June 1 to June 30, 2022)
 Publication of Summary of Report by the Working Group on Corporate Disclosure of the
Financial System Council (June 30, 2022)
 Bank of Japan Review Progress toward resolvability to address TBTF problem (June 22, 2022)
 Assistant Commissioner of International Affairs Office Elected New Co-Chair of the FATF
Policy Development Group (June 20, 2022)
 Overview of major banks’ financial results as of March 31, 2022 (June 17, 2022)
 Overview of financial results of major insurance companies as of March 31, 2022 (June 17,2022)
 Japan and Indonesia Sign Letters on Cooperation Framework regarding Innovation in the
Financial Sector (June 17, 2022)

 Summary of Results of the FSA-sponsored International Symposium “Transition to Net-Zero:
The Role of Finance and Pathway toward a Sustainable Future” (June 14, 2022)
 The first Meeting of the UK-Japan Financial Regulatory Forum and Exchange of Letters on Cooperation in the area of Financial Regulation with HMT (June 10, 2022)
 FSA publishes an English translation (preliminary version) of the “Comprehensive Guidelines
for Supervision of Major Banks” (June 8, 2022)
 Overview of the Japanese regional banks' financial results for six months ended September 30,
2021 (June 3, 2022)
 Bank of Japan Review Review of JPY LIBOR Transition and Future Initiatives (June 2, 2022)
 Publication of the Key Results of the Survey on JBA TIBOR Exposures by JBA TIBOR
Administration (June 1, 2022)

・JFSA's official English Twitter accounthttps://twitter.com/JFSA_en

We are promoting information
dissemination using Twitter!

・ Please send your opinions using the following email address to the Public
Relations Office's personnel in charge of Access FSA.
E-mail : fsa_kouhou@fsa.go.jp

Editorial Postscript
The July issue contains three articles throughwhich the persons in charge are made visible.

Through interviews, we noticed their goodteam work.

If you have any opinion or topic of interest, please contact us at fsa_kouhou@fsa.go.jp.
SAITO Takafumi, Director,
Public Relations Office, FSA

17(*The opinions expressed in this report are the personal views of the author and do not necessarily reflect the organization
with which the author is affiliated.)