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A $29 Billion Derivatives Market Faces Squeeze in Japan

  • Financial regulator has been clamping down on structured bonds
  • Move deals blow to lucrative business for banks, brokerages
Toshinori Yashiki
Toshinori YashikiPhotographer: Kentaro Takahashi/Bloomberg
Updated on

Japan is intensifying a clampdown on its $29 billion structured products market, threatening a lucrative business for banks and brokerages after it saddled mom-and-pop investors with losses.

The country’s financial regulator wants to largely eliminate sales to individual investors of so-called structured bonds, which offer higher returns than regular debt but at significantly higher risk, people familiar with the matter said, asking not to be identified as the information is private. Some big financial institutions have already scaled back or stopped selling the securities in the face of pressure from the Financial Services Agency.