> ## Content Index > Fetch the complete content index at: https://www.fintechobserver.com/llms.txt > Use this file to discover other available public pages before exploring further. # FY2025 Performance Evaluation of the Financial Services Agency - URL: https://www.fintechobserver.com/fy2025-performance-evaluation-of-the-financial-services-agency/ - Published: 2026-09-07T02:13:06.000Z - Updated: 2026-09-07T02:13:06.000Z - Author: Norbert Gehrke - Tags: supervision, regulation, transformation This briefing synthesizes the performance evaluation of the Financial Services Agency (FSA) for the period of July 2025 to June 2026 (FY2025), as published in September 2026\. The evaluation period was characterized by a significant shift in the financial environment, specifically the transition to a "world with interest rates" and the rapid advancement of digital finance. The FSA achieved an overall rating of "A" (Goal Achieved) for its primary measures. Key successes include the maintenance of financial system stability through forward-looking macroprudential analysis and the implementation of international regulatory standards such as Basel III and economic value-based solvency regimes. Despite these achievements, the FSA identifies ongoing challenges regarding the diversification of risks in global banking, the sustainability of regional financial institutions, and the need for enhanced cybersecurity and internal governance. ## Sign up for Japan FinTech Observer Cutting through the noise of Japanese Finance & FinTech Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ## I. Framework of Policy Evaluation The FSA’s evaluation process is grounded in the "Act on Evaluation of Policies Performed by Administrative Organs." Its primary objectives are to ensure accountability to the public, realize high-quality financial administration, and achieve results-oriented outcomes from a citizen’s perspective. ### 1\. Evaluation Criteria Policies are evaluated based on three primary perspectives: - **Necessity:** Whether the policy meets public/social needs and aligns with higher-level administrative goals. - **Efficiency:** The relationship between the costs incurred and the effects achieved. - **Effectiveness:** Whether the actual effects meet or are expected to meet the intended goals. ### 2\. Rating Scale Performance is measured against targets on a five-point scale: - **S:** Targets exceeded. - **A:** Targets achieved. - **B:** Significant progress made. - **C:** Limited progress. - **D:** No progress toward the target. ## II. Detailed Analysis of Key Policy Themes ### 1\. Financial System Stability and Macroprudential Supervision The FSA prioritized maintaining stability amid changing interest rate environments and global market volatility. - **Forward-Looking Analysis:** The agency conducted "forward-looking" analysis of potential systemic risks, focusing on interest rate trends and real estate market conditions. - **Macroprudential Implementation:** The FSA collaborated with the Bank of Japan (BoJ) to manage macroprudential tools, such as the Counter-cyclical Buffer (CCyB). - **Specific Institution Monitoring:** - **G-SIBs (Global Systemically Important Banks):** Monitored for credit risk, particularly in business restructuring funds, and market/liquidity risks related to foreign currency. - **Regional Banks:** Focused on securities investment monitoring and ALM (Asset Liability Management) strategies to address interest rate fluctuations. - **Non-Bank Entities:** Analyzed the vulnerabilities of non-bank financial intermediaries and digital finance entities. ### 2\. Regulatory and Institutional Frameworks The FSA contributed to international rule-making and domestic institutional improvements to safeguard the financial foundation. - **International Standards:** The agency actively participated in global discussions regarding digital finance and non-bank financial fragility. It ensured the smooth implementation of Basel III (starting from the March 2025 period) for international banks. - **Insurance Sector:** Introduced economic value-based solvency regulations in FY2025 to align with international standards and ensure policyholder protection. - **Resolution Frameworks:** Enhanced the effectiveness of bankruptcy resolution frameworks through increased cooperation with overseas authorities and the Deposit Insurance Corporation of Japan. ### 3\. Financial Intermediation and Business Support A core goal was ensuring that financial institutions provide value-added services to support a sustainable economy. - **Business Support:** Encouraged institutions to support businesses through management improvement, business succession, and debt restructuring, particularly in the post-COVID era. - **Digital Innovation (Payment Innovation Project - PIP):** Launched within the "Fintech Proof of Concept Hub," the PIP supported the joint issuance of yen-based stablecoins by three mega-banks to facilitate cross-border remittances and blockchain-based settlements. ### 4\. Cross-Cutting Policies and Organizational Reform The FSA identifies several "horizontal" themes that impact all basic policies: - **Sustainable Finance:** Supporting "Green Transformation" (GX) and economic growth through financial support and international communication of Japan’s contributions. - **Cybersecurity and IT Governance:** Strengthening the resilience of financial institutions against natural disasters and cyber threats. - **Internal FSA Governance:** Improving policy-making through data-driven approaches and reforming personnel strategies to foster a professional and healthy work environment. ## III. Key Performance Indicators (KPIs) and Data Points The following table summarizes the financial health indicators for various sectors as of March 2026 (R8/3): ![](https://storage.ghost.io/c/46/cb/46cbd57f-e0e8-41a4-a1e2-710103a4267b/content/images/2026/09/Screenshot-2026-09-07-at-11.10.36.png) ## IV. Critical Insights and Future Challenges ### 1\. Emerging Risks in a "World with Interest Rates" The shift in the interest rate environment requires a fundamental re-evaluation of financial institution business models. The FSA noted that institutions must transition from simply providing liquidity to offering sophisticated ALM and risk management strategies to protect their financial health. ### 2\. Sector-Specific Vulnerabilities - **New Type Banks:** High priority on AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) and managing risks associated with non-financial parent companies. - **Regional Institutions:** The need to balance financial intermediary functions with the maintenance of sound capital amid population decline. - **Securities/Asset Management:** Strengthening "Product Governance" to ensure products are designed and sold in the "best interest of the customer." ### 3\. External Oversight and Governance The FSA integrated insights from its "Expert Committee on Policy Evaluation." The committee members (as of June 2026) included prominent figures such as: - **Hiroshi Nakaso** (Chairman, Daiwa Institute of Research) - **Masako Egawa** (Chancellor, Seikei Gakuen) - **Takeo Hoshi** (Vice President, University of Tokyo) ### 4\. Organizational Evolution On August 7, 2026, the FSA underwent a reorganization to further integrate its monitoring functions. While this report uses the pre-reorganization names, it highlights a move toward a more "integrated and effective" monitoring system through the establishment of "Cross-cutting Monitoring Departments." ## V. Conclusion The FSA has successfully met its FY2025 targets, but the evaluation warns against complacency. The rapid pace of digital transformation and the increasing intensification of natural disasters require the FSA to remain agile, continuously updating its monitoring indicators and deepening its engagement with international partners. --- [FSA Warns of Real Estate Concentration and Securities VolatilityThe Financial Services Agency (FSA) has issued a stark ultimatum to Japan’s financial sector in its July 2026 monitoring report: adapt to the “world with interest rates” or face systemic irrelevance. As the transition from negative to positive policy rates triggers a violent recalibration of bank balance sheets, the![](https://storage.ghost.io/c/46/cb/46cbd57f-e0e8-41a4-a1e2-710103a4267b/content/images/icon/Newsletter-Small-b4b1dfee-fc41-4866-9df3-56476d4ffe4b.png)Japan FinTech ObserverNorbert Gehrke![](https://storage.ghost.io/c/46/cb/46cbd57f-e0e8-41a4-a1e2-710103a4267b/content/images/thumbnail/FSA-2e7c46e2-24d7-4686-b06f-03f2d5f171a8.png)](https://www.fintechobserver.com/fsa-warns-of-real-estate-concentration-and-securities-volatility/)