JFSA Consultations

Key dates

2026-10-16

The FSA published the exposure-draft consultation materials prepared by the Audit Standard Committee of the Business Accounting Council.

2026-11-16 Deadline

Public comments close at 5:00 p.m. JST.

Suggested considerations

• Audit firms should review the exposure draft against current Japanese Auditing Standards, the Standard to Address Fraud Risks, ISA 240, and ISA 570, and identify differences in required procedures, documentation, communications, and reporting.
• Issuers and other audited entities should assess whether their going-concern assessment process, cash-flow forecasts, stress testing, remediation plans, and financial-statement disclosures can support a more demanding auditor review.
• Finance and audit-committee functions should consider whether management’s documented assessment period extends to at least 12 months after the financial statements’ authorization date, as indicated by independent commentary on the draft.
• Audit committees and supervisory boards should consider whether existing oversight of fraud-risk assessment, management override, whistleblowing, unusual transactions, and remediation of control deficiencies addresses issues highlighted by recent Japanese fraud cases.
• Eligible stakeholders should consider submitting comments to the FSA by 5:00 p.m. Japan Standard Time on November 16, 2026, particularly on transition timing, the scope of enhanced going-concern reporting, and the interaction between the Japanese standards and international standards.
• Multinational groups should monitor the final Japanese requirements and compare them with the going-concern and fraud-audit requirements applied to the group under ISA or other local auditing frameworks.

What changed

The consultation proposes revisions requiring auditors to take more appropriate and consistent actions regarding the going-concern assumption and to enhance explanations and information provided about going-concern matters, while maintaining consistency with international auditing standards. It also initiates a review of the alignment between International Standards on Auditing, Japanese Auditing Standards, and Japan’s Standard to Address Fraud Risks, including whether the standards adequately address lessons from recent fraud cases.

Key dates

Summer 2026

- Official adoption of the revised Corporate Governance Code

May 15, 2026 Deadline

- Public consultation comment submission deadline (JST)

June 1, 2026

- Anticipated effective date (based on historical pattern; confirmation pending final adoption)

July 2027 Deadline

- Listed companies must submit governance reports under the new code

Suggested considerations

• *For Listed Companies:
• *Immediate (by May 15, 2026): Review the draft revisions (Materials 1 and 2) and consider submitting comments during the public consultation period if your organization wishes to influence final provisions.
• *Pre-Implementation (Summer 2026): Conduct a comprehensive gap analysis comparing current governance practices against the draft requirements, particularly regarding:
• Board processes for examining resource allocation decisions
• Documentation of investment policy rationale

What changed

• The draft revisions introduce several substantive modifications to Japan's corporate governance framework:
• Resource Allocation Focus: Boards must continuously examine whether management resources (cash, deposits, real estate, and other assets) are allocated appropriately, with emphasis on growth...
• Principles-Based Streamlining: The code has been streamlined to adopt a more principles-based approach, moving from form to substance and reducing prescriptive requirements.
• Collective Engagement Promotion: The revisions aim to promote collective and collaborative engagements among investors, strengthening dialogue between companies and investors.
• Beneficial Shareholder Transparency: Enhanced transparency requirements regarding the identification of beneficial shareholders.

Key dates

March 2025

- Original AI Discussion Paper (Version 1.0) published

March 3, 2026

- FSA publishes AI Discussion Paper (Version 1.1) in Japanese

Ongoing

- Comment submission period (no specified end date provided; comments accepted via email to [email protected])

June

December 2025; - Previous stakeholder engagement period (completed; informed Version 1.1)

Suggested considerations

• *Immediate (for compliance and risk teams):
• *Obtain and review the full AI Discussion Paper (Version 1.1) (available as Attachment 1 from the FSA website)
• *Assess current AI implementations against the preliminary discussion points outlined in the paper
• *Identify regulatory gaps in existing AI governance frameworks relative to FSA expectations
• *Short-term (30-90 days):

What changed

• The Version 1.1 update reflects a stakeholder-informed evolution rather than a complete regulatory overhaul:
• Incorporation of industry feedback: The revision integrates insights from the FSA AI Public-Private Forum discussions on AI utilization status, risk management practices, and regulatory application...
• Expanded scope: The paper now addresses "a broad range of related issues" beyond the initial Version 1.0 framework, reflecting emerging challenges identified through industry dialogue
• Preliminary guidance framework: The document provides initial guidance on current state assessment and challenge identification, explicitly acknowledging that technological advancements may alter...
• Regulatory clarity initiative: The paper addresses "situations that require clarification on how regulations apply" to AI implementations, signaling the FSA's intent to reduce regulatory ambiguity...