Translated excerpt from "World of Toshi Shintaku" (January 2019), Kohji Sugita’s comprehensive book, published by Kinzai Institute for Financial Affairs, Inc., about Japanese investment funds ('toshi shintaku'), commonly known as 'toshin'.
IJ will reproduce Chapter 3 “History of Toshi Shintaku”, Section 4 “Diversification and Globalization” in three parts. This is the first of the 3-part series.

Before you read……

Some native-English readers may be unfamiliar with the term "investment trust" in articles about Japanese investment vehicles. The term is rarely used in US-oriented financial centers and is used in the UK to mean only a closed-end fund.

Japanese speakers usually say 'toshi shintaku' or the portmanteau 'toshin', which translates literally as "investment trust," to mean financial instruments such as US-type mutual funds and the like. The translation of some legislative or legal text regarding 'toshi shintaku' sometimes requires use of the term "investment trust," but for this article and elsewhere in IJ, 'toshi shintaku' and 'toshin' mean "mutual fund" or "fund."

< Pre-World War II >

The very first equity co-investment partnership in Japan was established under the Civil Code in 1937 by Fujimoto Bill Broker, now known as Daiwa Securities. Fujimoto collected money from its members to invest in securities and apportion capital gains or income to them. Japanese lawmakers came to regard this partnership as a quasi-trust, however, and in July 1940 terminated the creation of new investment partnerships. In response, Fujimoto dissolved its partnership in anticipation of new legislation covering investment structures.

In November 1941, Ministry of Finance approved an investment trust, modeled after unit trusts in the UK, to increase national savings, stabilize stock prices, and strengthen industrial production in preparation for the war. Nomura Securities and Nomura Trust Bank were named trustor (investment manager) and trustee. As five other security houses established their own investment trusts in 1942, raising funds increased. At the end of the war in August 1945, the trusts were terminated. All redemptions and other clearing activities were completed by March 1950.

< Post-World War II >


  legislation & structure products sales asset management
1950s Securities Investment Trust Law in force (1951)

Initially unit-type stock funds (1951)

Open-type funds introduced (1952)

Securities houses only Mainly domestic equities

Investment trust management companies are established by separation of trustor function from securities houses (1960)

Revision of Securities Investment Trust Law prescribing fiduciary duty of Investment trust management companies to beneficiaries, disclosure obligation, etc. (1967)

Bond funds introduced (1961)   Inclusion of domestic bonds gains momentum (1961)
1970s     Liberalization of sales of foreign funds (1972) Inclusion of foreign equity in funds begins (1970)
1980s Investment trust management companies expand into investment advisory business (1984) Medium-term government bond funds launched (1980)    

Foreigners move into investment trust management business (1990)

Banks move into investment trust management business (1993)

Investment Trust Reform in force (1995)

Acts for the Financial System Reform in force (1998)

Money market fund (MMF) introduced (1992)

Nikkei 300 ETF launched (1995)

The first monthly-dividend-type fund launched (1997)

Privately offered funds introduced (1999)  ………………………

Direct sales by investment trust trust trust management companies begin (1993)

Banks and insurers move into fund sales (1998)

Deregulation of investment management, enabling use of derivatives for non-hedge purpose, etc. (1995)

Outsourcing of asset management begins (1998)


Fiduciary liability of Investment trust management companies clarified (2000)

Bond funds transition to mark-to-market valuation (2001)

Defined contribution pension plans introduced (2001)

Financial Instruments and Exchange Act in force (2007)

Corporate-type funds introduced (2000)

REITs (real estate investment trusts) introduced (2001)

In-kind contribution type ETFs introduced (2001)

The first currency selection-type fund launched (2009)

Act on Sales, etc. of Financial Instruments in force (2001)

Investment fund sales at post offices begin (2005)

Investable assets by funds expand, including real estate (2000)

Some Money Market Funds lose principal (2001)

Commodities included in investable assets (2008)


Procedures for fund mergers simplified (2014)


System for reporting total returns on funds to investors initiated (2014)

New risk regulation initiated (2014)

The chart above is a chronological listing of Japanese investment fund types and their enabling legislation, along with descriptions of products, sales/retailing, and asset management – the defining features of investment trusts.

1.  Main developments (legislation and structure)

Today's landscape of Japanese investment funds grew out of enactment of the Securities Investment Trust Law in June 1951. The primary goal of introducing fund schemes was "democratization" of securities, specifically to adjust supply and demand for the massive number of stocks released to market following the post-war dissolution of 'zaibatsu' (family-run conglomerates). Investment funds served political goals by raising cash to foster industry during the post-war cash shortage. The law sought to re-create prewar monetary trusts via contractual- and unit-type investment funds.

The law was partially revised in 1967 after the "securities recession" of 1964-65, clarifying the fiduciary duty of trustors (investment mangers) to beneficiaries (e.g., settlors' duty of loyalty to beneficiaries) and codifying standards for trustors' practice. In 1995, drastic reforms were implemented, including deregulation of investment management and enhanced disclosure requirements.

In 1998 came the "Japanese Big Bang," comprehensive Financial System Reform advocating the principles of "free, fair, and global". 'Toshin' fund sales channels expanded to included banks and other depository institutions. Corporate type investment funds, which predominated in the US, were introduced to globalize the Japanese market. Up to that point, only contractual-type investment funds existed in Japan. Under Financial Reform, creating funds became easier under a "filing system" versus an "approval system". The ban on private placement investment funds was lifted. Investment firms were allowed to outsource investment management. Disclosure requirements were toughened, in line with the Securities and Exchange Act of 1948.

In 2000, Japan's investment fund landscape grew to include the real estate investment trust (J-REIT). The law was renamed the Act on Investment Trusts and Investment Corporations, removing the word "securities" and adding a manager's duty of care to the code of trustors' practice.

Retail channels broadened again in 2005, as sales of 'toshin' funds began at post offices prior to privatization of the postal service. In 2006, the Financial Instruments and Exchange Act was enacted and put in force at the end of September 2007. The code of trustors' practice was relegated to this new act. In 2014, regulations governing risks in asset management were introduced.

Assets under management in publicly-offered security funds peaked at JPY 59 trillion in 1989 and fell dramatically when Japan's bubble economy burst. AUM increased through 2005 as Japan's stock market recovered. During the financial crisis of 2008, AUM dropped 35% from the previous year. The figure bottomed out in January 2009 and reached over JPY 100 trillion in May 2015 for the first time in Japanese fund history. (AUM of publicly offered toshin was JPY 116 trillion at the end of September 2018.)

However, Japan's share in the worldwide market of investment funds only 2.2%, of which AUM was USD 44.9 trillion or JPY 5 quadrillion in 2017. That is a fairly small figure compared with Japan's 6% share of worldwide GDP. Stated more positively, however, Japan's 'toshin' market is poised for tremendous growth, especially as part of the government's stated campaign to nudge more citizens toward investing over saving.


( continued in Part 2: )