JAPAN Law and Practice Contributed by: Daisuke Tanimoto, Etsuko Yamazaki and Miki Okuda, Anderson Mōri & Tomotsune
Anderson Mōri & Tomotsune Otemachi Park Building 1-1-1 Otemachi, Chiyoda-ku Tokyo 100-8136 Japan Tel: +81 3 6775 1154 Fax: +81 3 6775 2154 Email: daisuke.tanimoto@amt-law.com Web: www.amt-law.com
1. General 1.1 Overview of Derivatives Markets
Separately from the FIEA, the CFEA regulates OTC derivatives transactions falling under the definition of OTC Commodity Derivatives Transactions, which include OTC derivatives transactions referencing commodities such as oil, gas, electricity, precious metals and agricultural products. OTC derivatives referencing underlying instruments which are related to neither financial instruments nor commodities will not trigger the licensing/registration requirement under the FIEA or the CFEA. Exchange-traded derivatives referencing financial instruments and commodities are also regulated under the FIEA and CFEA. 1.2 Historical Trends and Looking Forwards As a result of an amendment to the Foreign Exchange and Foreign Trade Act (Act No 228 of 1949, as amend - ed) which came into force in 1980, Japanese parties are now able to enter into cross-border transactions without having to obtain any prior consents/approvals from the Japanese authorities under this Act in most cases. This event has had a significant impact on the development of the derivatives market in Japan. In 1998, the Act on Close-Out Netting of Specified Financial Transactions Conducted by Financial Institu - tions (Act No 108 of 1998, as amended) was enacted, and the validity and enforceability of the close-out net - ting arrangement concerning certain OTC derivatives has been expressly confirmed by legislation. Further, as a result of amendments to insolvency laws (eg, Article 58 of the Bankruptcy Act), protection of the close-out netting arrangement has been expanded to
The regulation of derivatives under Japanese law is divided into two major pieces of legislation, namely, the Financial Instruments and Exchange Act (Act No 25 of 1948, as amended, FIEA) and the Commodities Futures and Exchange Act (Act No 239 of 1950, as amended, CFEA). The FIEA regulates over-the-counter (OTC) deriva - tives transactions falling under the definition of OTC Financial Derivatives Transactions, which include OTC derivatives referencing financial instruments such as interest rates, FX, equity, credit, electronic payment instruments or crypto-assets. The concept of OTC Financial Derivatives Transactions is further divided into the following three categories: (i) secu - rities-related OTC Financial Derivatives Transactions (ie, OTC Financial Derivatives Transactions which refer to securities); (ii) non-securities-related OTC Financial Derivatives Transactions (ie, OTC Financial Derivatives Transactions which do not refer to securi - ties) which do not reference crypto-assets etc; and (iii) non-securities-related OTC Financial Derivatives Transactions which refer to crypto-assets etc. As a result of an amendment to the FIEA in 2022, the term “crypto-assets etc” is defined to include not only crypto-assets but also certain electronic payment instruments defined under the Payment Services Act (which essentially means stablecoins). The scope of electronic payment instruments included in the defini - tion of “crypto-assets etc” is to be designated by the Financial Services Agency of Japan (JFSA), but such designation has not yet been made.
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