Japan - funds analogous to investment trusts existed in Japan in 1937 in the form of investors’ associations, which, like the UK’s Foreign & Colonial Company’s original investment trust, faced challenges of legality and were dissolved in 1940, to be replaced in 1941 by undertakings that, modelled on the UK’s unit trust, found legal support. Post-war confusion led to these funds becoming closed to new investment in August 1945 and final dissolution in February 1950.

Patterned on the USA’s Investment Company Act of 1940, Japan’s Securities Investment Trust Law was passed in June 1951, providing the legal basis for the type of investment trusts now in operation. Originally, these investment trusts were established to meet the changing requirements of government policy to popularize securities investment, thereby providing much-needed capital for the rehabilitation and reconstruction of business operations and production facilities, rather than ii, response to economic growth and investor demand, as elsewhere in the world. The responsible body at that time was the Securities and Exchange Commission but this body was abolished in 1952 and its functions taken over by the Ministry of Finance, Fundswhich retained responsibility for the authorisation and regulation of investment businesses and funds until June 1998, when responsibility transferred to the Financial Supervisory Agency, which in turn gave way to the Financial Services Agency in July 2000. The MoF introduced amendments to the law in 1967 and Guidelines for Licensing Investment Trust Management Companies in 1989, revising them in 1992. Continuing depression of Japan’s stock market from 1990 brought about deregulatory reforms, firstly in late 1994/early 1995, then a package of measures in 1997 and finally reform of the law, effective in December 1998, to make Japan’s system comparable with those in operation in the USA and Europe. Still further amendment occurred in 2000, when the law was renamed the Law for Investment Trusts and Investment Companies. This law allows for funds established as securities investment trusts (known as contractual type funds) to have broader investment objectives/policies than previously (e.g. to invest in real estate), and to be either publicly offered or privately placed trusts, and also makes provision for funds to be established as investment companies (known as corporate type funds). In June 2006 the Financial Services Agency proposed a new legislative framework for investor protection, the Financial Instruments and Exchange Law, containing far-reaching reforms and consolidation of existing laws to bring Japan into line with the rest of the developed world’s approach to financial services.

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