Japan Confronts Insider Trading Risks In The Global And Digital Era
As Japanese companies expand their global footprint and the digital asset market continues to mature, Japan is confronting a surge in insider trading risks that threaten market integrity and investor confidence. High-profile scandals, a growing cross-border presence, and the rapid rise of cryptocurrency trading have all intensified scrutiny on how the country detects and deters misconduct.
In response, regulators like the Financial Services Agency (FSA) and the Securities and Exchange Surveillance Commission (SESC) are ramping up enforcement and exploring legislative updates — particularly around how digital assets are classified and monitored. Their efforts reflect a broader push to align Japan’s traditionally strong market integrity standards with the complex realities of a global, digital marketplace.
What’s Driving the Concern?
Global Expansion Brings Offshore Risk
Japanese firms are increasingly active across Asia, North America, and Europe. According to the Ministry of Economy, Trade, and Industry (METI), Japan’s outward foreign direct investment reached 25.5 trillion yen (approx. $170 billion) in 2023, driven by growth in financial services, pharmaceuticals, and tech. As operations globalize, so does the risk of insider trading beyond domestic borders. Compliance teams face growing difficulty monitoring employee behavior across jurisdictions—especially during merger & acquisition (M&A) activity and within complex subsidiary networks.
M&A and Private Equity
In 2025, Japan’s private equity market is projected to reach a deal value of US$47.48 billion across approximately 297 deals, with an average deal size of US$160 million (according to Statista). Growth is being fueled by rising interest from both domestic and international investors, a heightened focus on technology-driven startups, and favorable macroeconomic conditions supporting stability and diversification. Key trends include an increase in carve-outs, take-private transactions (often via unsolicited bids), and a rise in consortium deals. According to Nikko Asset Management, major private equity players are also ramping up their Japan-focused investments.
The Crypto Factor
Japan ranks among the top five countries for cryptocurrency trading volume, with over 72 trillion yen ($500 billion) in annual transactions. While crypto was once outside the reach of traditional securities laws, the FSA is now reclassifying certain tokens as financial products under the Financial Instruments and Exchange Act (FIEA). This shift allows regulators to apply insider trading laws to crypto, targeting risks like undisclosed token listings, insider-driven price spikes, and wash trading.
Scandals That Shook the System
Recent enforcement actions reflect the SESC’s commitment to cracking down on insider trading—and demonstrate that even individuals in trusted roles are not immune:
- Soichiro Sato (2024): A former judge assigned to the FSA was indicted for using confidential tender offer information to trade shares across 10 companies, earning
- Keito Hosomichi (2024): A former Tokyo Stock Exchange employee leaked sensitive deal information to his father, who then executed trades worth approximately 17 million yen.
- Japan Steel Works (2023): Three employees of a subsidiary client misused MNPI for margin trades, triggering administrative penalties.
- CONTEC Co., Ltd. (2024): An officer shared tender offer details with acquaintances, leading to fines totaling 4.77 million yen.
- Yuji Naka (2022–2023): The “Sonic the Hedgehog” co-creator received a suspended prison sentence and was fined for trading on confidential information about unannounced game developments, forfeiting over 171 million yen.
These cases underscore the importance of internal controls and ethical awareness—especially as individuals outside of traditional finance, including tech and gaming, increasingly access deal-sensitive information.
Regulatory Response and Reform
Japan enforces strict prohibitions against insider trading and market manipulation under the FIEA, with enforcement extending beyond executives to include quasi-insiders such as lawyers, accountants, M&A advisors, and government officials. Current initiatives include:
- Crypto Classification: Reclassifying select crypto tokens as financial instruments allows insider trading rules to apply to token-related material non-public information (MNPI).
- Mandatory Information Barriers: Financial institutions and crypto exchanges must maintain internal “firewalls” between departments (e.g., trading, advisory, research) and conduct regular audits.
- Cross-Border Surveillance: The FSA and SESC are collaborating with international regulators to pursue misconduct involving Japanese nationals on overseas exchanges.
- Emerging Risks: New enforcement priorities include AI-generated trading signals, social media manipulation, and DeFi platform abuse.
How StarCompliance Can Help
With insider trading risks rising in both scope and complexity, Japanese firms need a compliance infrastructure that adapts to global operations and digital markets. StarCompliance (Star) delivers a SaaS-based suite of products built to meet these demands:
- Employee Conflicts of Interest: Monitor employee trading across regions and asset types—including crypto—with customizable jurisdictional controls.
- Crypto Pre-Clearance: Require employees to pre-clear crypto trades, reducing the risk of insider activity.
- MNPI & Enterprise Conflicts: Apply automated controls to flag MNPI-related trading, enforce blackout periods, and support FSA-required internal barriers through firewall management tools.
- Comprehensive Audit Trails: Ensure transparent records for regulators through detailed tracking of reviews, decisions, and approvals.
“By equipping firms with scalable, automated controls, Star helps build a culture of compliance that grows with your business—whether you operate solely in Japan or across multiple jurisdictions. Our platform is designed to support multinational organizations, offering the tools and flexibility needed to manage employee compliance in markets around the globe.” – Steve Brown, Head of New Business at Star
Conclusion
Japan is taking bold steps to confront insider trading risks amid increasing globalization and the mainstreaming of digital assets. But strong compliance isn’t just about avoiding fines—it’s a way to build trust with stakeholders and the market. With the right technology and governance, firms can protect their reputation and stay ahead of evolving regulatory demands.
Star is ready to support that mission—at home and across borders. To learn more about Star’s full suite of employee compliance software, schedule your personalized demo here.
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