Japan’s 2026 Financial Regulatory Amendments: Promoting Funding for Startups

JAMP Compliance Newsletter No. 72 | Part 4: Promoting Funding for Startups

JAMP Financial Solutions Co., Ltd., a subsidiary of JAMP Corporation, publishes the JAMP Compliance Newsletter for Financial Instruments Business Operators and firms considering registration in Japan. The newsletter covers regulatory developments and other matters relevant to financial business and compliance operations.

This five-part series examines Japan’s 2026 amendments to the Financial Instruments and Exchange Act and the Payment Services Act. The legislation was submitted to the 221st session of the National Diet on April 10, 2026, enacted on July 15, and promulgated on July 23 as Act No. 64 of 2026.

The series covers the following topics:

1. Overview and Policy Context
2. Review of Cryptoasset Regulation
3. Corporate Sustainability Disclosure and Assurance
4. Promoting Funding for Startups (this article)
5. Review of Unfair Trading Regulations for Securities (planned)

This fourth article focuses on measures intended to promote funding for startups, including changes to disclosure thresholds, private placements for Professional Investors, and disclosure rules for equity compensation.

Lowering Disclosure-Related Costs for Unlisted Companies

Reducing the disclosure burden associated with fundraising is an important policy issue in expanding the supply of capital to startups. For unlisted companies in particular, preparing a Securities Registration Statement and the related documentation can involve significant costs, and the regulatory burden may become an obstacle depending on the size of the fundraising.

The Financial Services Agency’s materials on the amendments emphasize the need for a graduated disclosure framework that takes account of disclosure burdens while maintaining investor protection, with the objective of encouraging further investment in startups and growth companies.

Under the amendments, the fundraising threshold below which filing a Securities Registration Statement is exempted will rise from less than JPY 100 million to less than JPY 500 million. As a result, fundraising of JPY 100 million or more but less than JPY 500 million, which previously generally required a Securities Registration Statement, will fall within the filing exemption.

The framework for smaller public offerings will also change. Under the previous framework, offerings of JPY 100 million or more but less than JPY 500 million were treated as “small offerings” and could use a simplified Securities Registration Statement. Following the amendments, the corresponding range will shift to JPY 500 million or more but less than JPY 1 billion.

Accordingly, fundraising of JPY 500 million or more but less than JPY 1 billion will be eligible for a simpler form of disclosure than a standard offering of JPY 1 billion or more.

The amendments should not, however, be understood simply as deregulation of disclosure. The policy is to establish different levels of disclosure depending on the scale of fundraising, seeking to balance smoother access to capital with investor protection. In that sense, the changes are designed to facilitate startups’ access to capital markets while retaining information disclosure considered necessary for general investors.

Expanding the Use of Private Placements for Professional Investors

Another practically significant change is the expansion of the range of persons who may be solicited in a private placement for Professional Investors under the Financial Instruments and Exchange Act.

Under this framework, fundraising from Professional Investors can qualify for an exemption from Securities Registration Statement requirements, subject to simplified information being provided or made public and to the involvement of a securities company. The use of the framework has nevertheless remained limited, in part because the population of Professional Investors has been relatively narrow.

The amendments therefore introduce the concept of a “Potential Professional Investor” for this purpose. This would be eligible to become a Professional Investor status and has a high level of information-analysis capability or similar capacity, but has not completed the procedure to become a Professional Investor because the person wishes to retain the conduct-of-business protections available to general investors.

Potential Professional Investors will be added to the range of eligible counterparties for private placements for Professional Investors. This is intended to broaden the potential investor base available to startups and encourage greater use of this fundraising framework.

An important feature of the amendment is the distinction it draws between disclosure regulation and conduct-of-business regulation. For disclosure purposes, Potential Professional Investors can be counterparties to a private placement for Professional Investors. For conduct-of-business purposes, however, they continue to be treated as general investors.

Accordingly, securities companies acting as intermediaries remain subject to requirements such as the suitability principle and applicable explanation obligations in dealings with Potential Professional Investors.

Facilitating the Use of Equity Compensation to Support Corporate Growth

For startups, recruiting and retaining talented personnel while operating with limited financial resources can be a major management challenge. Equity compensation, including shares and stock options, can therefore play an important role alongside cash compensation in recruitment, retention and incentive design.

Under the amendments, solicitations made when a company grants share certificates or share option certificates to officers or employees of the company or its subsidiaries will be excluded from the statutory concept of an “offering,” whether the company is listed or unlisted. A Securities Registration Statement will therefore not be required solely on the basis of such solicitation.

This change is expected to reduce administrative burdens and costs associated with implementing equity compensation arrangements.

Equity compensation arrangements, including stock options, have increasingly been used by startups as a mechanism for aligning the interests of officers and employees with corporate value creation. By facilitating the use of these arrangements, the amendments may help strengthen the human-capital foundations of growing companies by supporting recruitment, retention and employee incentives.

JAMP Commentary

The amendments can be viewed as supporting startup growth through several channels: facilitating fundraising, broadening the potential investor base, and reducing certain burdens associated with equity compensation.

At the same time, the government’s own policy materials identify the revitalization of the issuance and trading of unlisted shares as an urgent policy issue in expanding growth capital for startups and growth companies. Viewed against that broader objective, the measures in the amendments may leave further issues to be addressed.

If the objective is to increase the supply of capital to startups, developing a more effective secondary-market environment for unlisted shares is also important. Further development of secondary markets for unlisted shares, broader use of private trading systems, and the development of markets using new technologies such as tokenized shares or security tokens are therefore likely to remain important policy and market topics.

Author: JAMP Compliance Team, JAMP Financial Solutions Co., Ltd.
About This Article
This article is an adapted English edition of JAMP Compliance Newsletter No. 72, originally published in Japanese on October 6. It has been edited and supplemented where necessary to explain Japan-specific legal, regulatory and market context to readers outside Japan. It is therefore not a direct translation of the original Japanese article.

Legal and Translation Notice
Unless otherwise stated, English translations of the names of Japanese bills, proposed amendments and other terms for which no official English translation has been confirmed are provisional translations prepared for this article. The original Japanese materials should be consulted for authoritative wording.
This article is provided for general informational purposes only and does not constitute legal, regulatory, tax, accounting or investment advice. Laws, regulations, bills, official interpretations and implementation schedules may change. Readers should consult the relevant official Japanese materials and obtain advice from appropriately qualified professionals before taking action.