Japan's Financial Services Agency is proposing two new panels under the Financial Council, one to rework lending rules for growth companies and cross-border deals, the other to redesign the safety net that protects life insurance policyholders. The agenda for the joint meeting of the Financial Council's general assembly and its financial division, convening August 31, lays out specific questions for each proposed working group rather than settled policy.
Lending rules built for a different market
The first panel, the working group (tentative name) on financing for growth companies, will examine loosening the Money Lending Business Act's blanket rules on business loans, which currently apply the same way regardless of borrower type. Three concrete items are on the table: whether existing rules fit "professional-grade" lending to large companies undertaking restructuring or acquisitions; whether foreign banks without a Japanese banking licence should be allowed into syndicated loans arranged for Japanese companies buying overseas targets, deals that often need foreign-currency funding; and whether the Nonbank Bond Law's capital requirements for nonbank bond issuers should be revised to help venture-debt lenders raise money by selling bonds. The agency also wants to revisit paper-based disclosure and physical-posting obligations left over from a pre-digital lending era.
The trigger is dealmaking the current lending market cannot easily absorb. Japanese M&A hit a record 5,115 transactions worth ¥37.9tn in 2025, up 8.8% by count and 86.7% by value from the prior year. Deposit-taking banks still dominate that financing, and the agency's own comparison shows Japanese nonbank lenders' business-loan balances running at roughly one twenty-eighth the size of the US private-credit market.
| Category | Deals (2025) | Value (2025) | Change vs. 2024 |
|---|---|---|---|
| Overall | 5,115 | ¥37.9tn | +8.8% deals, +86.7% value |
| IN-IN (Japan-to-Japan) | 4,086 | ¥13.6tn | +10.4% deals, +97.1% value |
| IN-OUT (Japan buying overseas) | 657 | ¥18.2tn | -1.2% deals, +87.6% value |
A captive gap and a subsidy deadline
The second panel, the insurance system working group (tentative name), opens two separate questions. One is whether Japan should create a domestic reinsurance captive regime for non-life insurers. None currently exists: a corporate group that wants to insure only its own risk through a captive must obtain a full insurance licence, a burden heavy enough that many large Japanese groups instead set up captives in Hawaii and other overseas jurisdictions. A government-commissioned study group on corporate risk management recommended in an April report that officials examine captive use further.
The other question carries a firmer deadline. The Life Insurance Policyholder Protection Corporation draws on industry-funded reserves to support the transfer of contracts when a life insurer fails, backed by a special government-subsidy provision that has been extended six times since it was first introduced in 2000. That provision expires at the end of March 2027. The existing structure caps pre-funded industry reserves at ¥400bn, fully accumulated by March 2022, and government-guaranteed borrowing at ¥460bn, with government subsidy available only if support needs exceed those amounts and meet a statutory test: industry-only funding would have to severely worsen life insurers' financial condition, undermine public trust in the insurance business, and risk extremely serious disruption to the public or financial markets, a threshold the law has never actually triggered.
Both panels start from a list of questions, not draft rules. The Financial Council meets on August 31 to formally launch the working groups; their findings will feed into decisions on whether foreign lenders get easier access to large Japanese loan syndicates and whether the state renews its backstop for failed life insurers once the March 2027 deadline passes.