Japan: Financial Sector Assessment Program-Technical Note on Regulation and Supervision of Investment Funds

This technical note reviews the functioning and effectiveness of the regulation, supervision, and systemic risk monitoring of investment funds in Japan. It focuses on the requirements that are directly relevant to maintaining financial stability, namely, valuation, segregation and safekeeping of fund assets, liquidity risk management and redemption of fund units. The note also reviews the efficacy with which the authorities: i) analyze and monitor the systemic risk arising from fund management activities in Japan; ii) apply the domestic regulatory framework pertinent to investment funds; and iii) supervise compliance with the regulatory framework. The note sets out a series of recommendations to further strengthen the domestic regulatory, supervisory, and risk monitoring frameworks.