On July 15, 2026, the Diet passed an amendment to Japan’s Financial Instruments and Exchange Act. The reform covers a wide range of topics, but one of its important themes is the supply of growth capital to startups. The background to this reform is a policy concern that the existing disclosure rules have been burdensome for fundraising, and, from the perspective of reducing that burden, the following three amendments were made. The amendments discussed below will take effect on April 1, 2027.

First, the disclosure rules for fundraising from general investors were relaxed. Under the former regime, offerings and secondary offerings to 50 or more general investors generally required a securities registration statement, with exemptions available for deals below JPY 100 million and a simplified disclosure regime for deals between JPY 100 million and JPY 500 million. Under the new regime, taking into account the policy objective of promoting startup investments, as well as the fact that Japan’s exemption threshold has been lower than corresponding thresholds applied in other jurisdictions, the exemption threshold has been raised to JPY 500 million. This allows issuers, including both startups and listed companies, to carry out offerings of a certain size without filing a securities registration statement, thereby reducing fundraising costs and the burden of subsequent continuous disclosure. The simplified disclosure regime has also been expanded to cover JPY 500 million to JPY 1 billion, creating a more graduated disclosure framework.

Second, the reform broadens the scope of professional investor private placements. Previously, such private placements were outside the scope of a public offering, but the eligible investor pool was relatively narrow and included only certain professional investors (for example, qualified institutional investors, the Government of Japan, the Bank of Japan, listed companies, corporations with capital of at least JPY 500 million, financial instruments business operators, and foreign entities). Under the amended rules, "potential professional investors" are now added to the offeree pool for professional investor private placements—namely, corporations and individuals who satisfy the requirements to be treated as professional investor status but have not completed the formal opt-in procedure. This should make it easier for startups to raise capital of over JPY 500 million from a broader range of sophisticated investors without triggering securities registration.

Finally, the rules on equity compensation were simplified. Under the new regime, grants of shares or stock options to directors and employees can, subject to certain conditions, fall outside the definition of a "public offering," so companies may issue them without filing a securities registration statement. This should make it easier for startups to use equity compensation as a hiring and incentive tool.

Overall, the reform is expected to reduce fundraising costs for startups and to broaden their financing options. The raising of the exemption threshold for filing a securities registration statement will apply not only to startups but also to listed companies and foreign issuers and may therefore have a broader impact across the market. We hope that the reform will help diversify fundraising methods and contribute to the further development of Japan’s capital markets.