The deregulation of foreign exchange control in Japan
| Date | 01 March 1997 |
| DOI | https://doi.org/10.1108/eb024932 |
| Published date | 01 March 1997 |
| Pages | 243-248 |
| Author | Hiroaki Shinoda |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 5 Number 3
The deregulation of foreign exchange control
in Japan
Hiroaki Shinoda
Received: 22nd April, 1997
Fuji Bank Ltd, International Operations Service,
1-5-5,
Otemachi, Chiyoda-ku, Tokyo, 100 Japan;
tel:
81
3 3532
7330;
fax:
81
3 3532 7370
Hiroaki Shinoda is a member of the Fuji
Bank, Ltd., Japan. He is responsible for
international operations services which
includes the businesses of payment and
settlement; global custody and global cash
management, as well those that are trade-
related, and the Bank's back-office,
market-related transactions.
He is a board member of
SWIFT,
repre-
senting the Japanese banking community,
and a member of the Group of Twenty.
ABSTRACT
The Japanese 'Big Bang' is expected to cover
almost all areas of the country's financial sys-
tems. Within the many, differing revolutionary
changes, the 'front runner' is the reform of the
Foreign Exchange Control Law. The objectives
of the reform are to make the Tokyo market a
global financial centre and to provide free and
swift cross-border transactions for Japanese
investors.
The principal changes are: (a) liberalisation
of
cross-border
capital transactions, and (b) the
abolition of the authorised foreign exchange
bank system and that of
the designated securities
firms.
INTRODUCTION
The Japanese financial system is facing two
structural problems. The first one is the fact
that the financial system has fallen behind
from the global point of view, ie the Tokyo
market is less competitive compared with
such global financial centres as New York
or London. The second problem is the issue
of writing-off non-earning assets.
On the first point, the Prime Minister,
Mr Ryutaro Hashimoto issued directives to
the Finance and Justice Ministers and
instructed the relevant government com-
mittees to start discussions about reform of
the Japanese financial market, in November
1996.
This structural reform covers not
only securities business but also banking,
trust, insurance, pension businesses, includ-
ing the changes of foreign exchange control
and administrative organisations on finan-
cial issues. The Japanese government set a
goal for this 'Tokyo Big Bang' by the year
of
2001.
The basic principle of the compre-
hensive reform is to make the Tokyo finan-
cial market a 'free, fair and global' one.
The amendment of the Foreign
Exchange and Foreign Trade Control law
is considered as the 'front runner' of the
whole reform and as the key factor in lead-
ing other areas to follow to be positive and
successful. The reform bill, amending this
law, was passed by the Diet, on 15 May
1997.
The new law becomes effective from
1 April 1998.
The paper explains the background,
basic principles of the review and specific
changes to the law. This explanation is
mainly based on the report issued by the
Committee on Foreign Exchange and
other Transactions in January 1997.
Journal of Financial Regulation
and Compliance, Vol. 5, No. 3,
1997, pp. 243-248
© Henry Stewart Publications,
1358-1988
Page 243
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