Revitalizing Japan’s Asset Management Sector: Government Initiatives and Emerging Managers Program

The Japanese government is taking steps to revitalize the country’s investment sector and promote smaller asset managers through the introduction of the Principles for Responsible Investment (PRI). With the goal of establishing Japan as a leading asset management hub and doubling household income from investments, the government is implementing changes to securities laws and corporate governance standards to encourage more productive investments.

Currently, Japanese households hold a significant portion of their wealth in cash and deposits, with over half of their assets allocated to these low-yield investments. This is in stark contrast to the US and Eurozone, where households invest a much smaller percentage of their wealth in cash. The government believes that by encouraging more responsible and sustainable investments, they can increase returns for investors and drive economic growth.

One of the key initiatives introduced by the government is the Emerging Managers Program (EMP), which aims to support smaller asset managers and encourage asset owners to consider investing in new entrants to the market. By providing a list of vetted emerging managers and offering support for outsourcing middle- and back-office operations, the EMP seeks to level the playing field for smaller asset managers and promote competition in the industry.

Additionally, the government is urging asset owners to consider joining the PRI to ensure that stewardship requirements are met and sustainable investments are prioritized. By requiring financial institutions to take sustainability into consideration when outsourcing investments and establishing sustainability investment policies, the government hopes to drive positive change in the industry.

While membership to the PRI may be seen as expensive for smaller asset managers, the government is committed to providing support and resources to help them meet the requirements. With a focus on fiduciary duty and putting beneficiary interests first, the principles aim to create a more transparent and responsible investment environment in Japan.

Overall, the government’s efforts to promote responsible investment practices and support smaller asset managers are a positive step towards revitalizing the country’s investment sector and driving economic growth. By encouraging more sustainable investments and promoting competition in the industry, Japan is positioning itself as a leading asset management hub with a focus on long-term growth and stability.