On 15 July 2009, the Settlement and Payment Systems Act (Act) was enacted. The key aspects of that Act include:

The purpose of the Act is, by opening fund remittance services to non-bank entities who obtain the relevant authorisations, to increase the international competitiveness for settlement services of Japanese companies and to increase convenience for the consumer.

Recently, a mobile service provider has announced that it is planning to launch a fund remittance business with transfers being made through mobile phones. In addition, according to the news release, foreign companies such as the Paypal with rich experience in fund remittance business will break into the Japanese market. The Act will provide foreign companies with good opportunities for expanding their business in Japan.

On 26 June 2009, the Financial Services Agency of Japan (FSA) once again took administrative action against Citibank Japan Ltd. (CJL) by ordering it to:

The reason given by the FSA for taking the above actions was that, according to reports submitted voluntarily by CJL, a report prepared by the FSA and a subsequent on-site inspection, it was found that there are fundamental problems with CJL's compliance and governance systems from the perspectives of sound and appropriate business management. It was also reported that the FSA identified a few hundred customer accounts suspected of being used for illegal activities.

This is not the first time that CJL has found itself the subject of administrative action by the FSA. As a result of certain failures to comply with Japanese bank regulations by its Private Banking Division, the FSA cancelled a business approval of the division in September 2004.

It has sometimes been said that Japanese authorities apply a "light-touch" approach to restrictions aimed at mitigating the impact of anti-social activities. However, in recent years, such restrictions have become stricter. For example, in June 2007, the Japanese Government released the Guidelines for Private Companies to Prevent the Damages Caused by Anti-Social Organisations. Further, the tenth principal of the Principals in the Financial Services Industry, which the FSA published in April 2008, is "to establish mechanisms so as to avoid being exploited by financial crimes, including by way of blocking the anti-social parties' access". In addition, the Securities and Exchange Surveillance Commission of Japan added "a governance system to properly cope with anti-social organisations" as one of the checkpoints under the new Inspection Manual for Financial Instruments Business in July 2008.

The administrative actions taken against CJL could be seen as indicative of a stricter attitude being taken by Japanese authorities regarding anti-social organisations. However, such actions are expected to contribute to the transparency of the financial activities and facilitate economic growth in Japan so in all probability, they will become more prevalent.

For the details of the administrative actions of the FSA against CJL, see the FSA's official release (English version).

Sometimes, the cure can be worse than the cold. Indeed, this seems to be the case with the new Japanese Accounting Standards (JAS) (JAS; Statement No. 13 and Guidance No. 16) which was released by the Accounting Standards Board of Japan (ASBJ) and applies to annual financial statements for the fiscal year ending 31 March 2009.

One of the major changes to the JAS has been the treatment of non-transfer of ownership finance lease agreements (NTLAs) included in financial statements. Under previous accounting standards, NTLAs were not treated as sales transactions and therefore the asset leased did not form part of the reportable liabilities of the lessee company. The lease payments made by the lessee company were reported merely as expenses in respect of the reporting year.

However, there was some concern at the way in which the above treatment distorted the picture as to assets and liabilities of a company that was lessee in such a NTLA. The new JAS requires such a company to report the lease payments as liabilities (rent payable multiplied by the number of years in the remaining term of the lease) in an attempt to improve transparency of financial statements.

Notwithstanding this, there can be inconsistencies in the way different lessee companies report such NTLAs. This is because a company may apply the former JAS to NTLAs entered into before 1 April 2008. Many companies opt to apply the former JAS to such NTLAs which makes it difficult for investors to compare the liability profiles of different companies.

Some critics have recently identified this issue as something requiring change to promote transparency. At best, it appears that the new JAS will be in a state of flux over this issue for some time to come.

To view the ASBJ's release, click here.