By Zhang Chenghui &Wang Gang, Research team on “Reconstruction of China’s Financial Regulatory System” Research Institute of Finance, DRC

Research Report No.27, 2016 (Total 4910) 2016-3-22

Abstract: This report gives a systematic analysis of the transition of Japanese financial regulatory system before the financial crisis, pointing out that Japan is typically under the supervision of the integrated FSA (Financial Services Agency) in light of its organization structure. The analysis also illustrates the specific form of cooperation and division of labor among FSA, BOJ (Bank of Japan), and the Ministry of Finance relating to Japanese financial regulatory system. It sums up the measures of Japan in strengthening macro-prudential regulation after the financial crisis, including promoting the collaboration between regulatory department and BOJ, and intensifying the regulation of systematic risks. In conclusion, this report draws four implications from the reconstruction of Japanese financial regulatory system. First, the design of the financial regulatory system should avoid conflicts resulting from different departments’ functions as much as possible, and strengthen policy coordination on the basis of a clear definition of the responsibility of different departments. Second, to improve the regulatory system, emphasis should focus on increasing the transparency of supervision, as well as the evaluation and disclosure of the reform effect of regulatory system at an appropriate time. Third, adequate attention should be paid to the construction of relevant infrastructure during the reform of financial regulatory system. And fourth, the macro-prudential regulation should be implemented on a legal basis with clear division of labor and intensified coordination.

Key words: financial regulatory system, reform, macro-prudential regulation, micro-prudential regulation, Japan