Investment management and advisory business in Japan
The investment management and advisory business in Japan is regulated under the Financial Instruments and Exchange Act. The industry is broadly divided into two different business categories: the investment management business and the investment advisory and agency business. In the investment management business, discretionary investment management firms are authorized to manage clients' assets and make investment decisions on their behalf. Non-discretionary investment advisory firms, on the other hand, are limited to providing financial advice.In 2022, there were around 344 investment management businesses and 484 investment advisory businesses. Assets under management of these companies amounted to 530.58 trillion Japanese yen in March 2022. Institutional investors, first and foremost pension funds, were among the largest clients.
Promoting long-term wealth accumulation among private investors
Japan is a rapidly aging society. As average life expectancy increases and the labor force shrinks, the government has taken initiatives to promote private retirement savings among individuals.In 2022, Japanese households held around two quadrillion Japanese yen in financial assets. More than 50 percent of these were not invested but held as cash or deposits. Shifting these large amounts of households’ savings into investment could lead to increased demand for asset management and advisory services among individuals.
With the double-asset income plan, which was formulated in 2022, the government intends to encourage long-term asset accumulation and significantly increase income from investment among individuals. The plan includes amendments to tax-advantaged schemes, such as the Nippon Savings Investment Account (NISA) and defined contribution pension plans. These plans allow individuals to invest their savings and receive tax breaks on investment returns. Assets in such schemes have been steadily increasing over the past years.
