Japan’s Banking Regulator Urges Firms to Educate Retail Investors

Japan’s new Financial Services Agency Commissioner, Hideki Ito, has called on financial firms to reassure and educate inexperienced retail investors following significant market fluctuations this week.

Ito’s comments come as the government aims to channel more of the country’s $15 trillion in household assets into investments. Under Prime Minister Fumio Kishida, Japan revamped its tax-free NISA accounts this year, increasing investment caps and making balances permanently tax-exempt up to a certain level. This led to a surge in new NISA accounts.

Monday’s 12.4% sell-off, the second-largest drop in Tokyo market history, caused concern among retail investors, with brokerages reporting a flood of inquiries on Tuesday. This was the first major market turmoil since the NISA overhaul. As of March, there were approximately 23 million NISA accounts with about $267 billion invested.

Ito emphasised the need for financial institutions to carefully respond to anxious new NISA account holders and educate them on the benefits of long-term, diversified investment using historical data. 

Ito, who assumed his position in July, also highlighted the broader push to improve financial literacy in Japan. Kishida’s goal is to double household investment income to reduce reliance on the public pension system as the population ages.