December 23, 1994
TO: BOARD OF GOVERNORS No. 128-94
INTERNATIONAL MEMBERS No. 10-94
RE: JAPAN ANNOUNCES INVESTMENT TRUST REFORMS
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We are pleased to report that Japan's Ministry of Finance ("MOF") announced last week that,
for the first time, investment management firms will be permitted to register as both discretionary
investment advisers and investment trust (mutual fund) managers. MOF's action to eliminate the
prohibition on dual licensing has been an Institute priority for several years and follows the recent round
of U.S.-Japan framework talks and the Institute's report and meetings with MOF on related trade issues.
It is our understanding that an investment management firm will be able to apply for both
licenses and conduct both businesses using the same offices and personnel. No firewalls will be
required. According to the announcement, other changes in investment trust regulation also will be
made, including changes to improve disclosure of investment trust performance data and changes to
permit investment trusts to invest in a wider range of products, including derivatives.
The changes announced last week should lower costs for and facilitate the operations of U.S.
money managers seeking to enter the Japanese pension management and mutual fund markets. We
intend to continue to follow MOF's actions in close consultation with the Treasury Department officials
involved in the ongoing trade negotiations. We will keep you informed of further developments that we
expect in the course of these negotiations.
Catherine L. Heron
Vice President & Senior Counsel