The Financial Services Agency has announced it will relax regulations on banks investing in startups and similar entities. While current regulations limit investments to non-listed companies only, the agency plans to revise the enforcement regulations of the Banking Act by mid-2026. This revision will allow banks to continue holding investments for a certain period even after the company goes public, thereby supporting startup growth.

Banks can currently invest in unlisted startups established within the last 20 years through specialized investment subsidiaries. This will be amended to permit continued investment after listing, provided the holding period remains within the 15-year maximum limit. The current restriction to investing only in corporations will also be changed to allow investments in entities like limited liability companies (LLCs), which have simpler establishment requirements.

VC firms typically sell their shares at the time of listing to lock in profits. Listing with a small market capitalization often makes it difficult for startups to attract institutional investors, leading to challenges in raising new funds at the time of listing. A key issue was that capital support for emerging companies backed by banks would often cease upon their listing.

The government launched the “Five-Year Plan for Startup Development” in 2022. While it set a target to expand investment to around 10 trillion yen by fiscal 2027, startup funding over the past few years has remained around 800 billion yen.

Regional banks are increasingly establishing investment subsidiaries to fund startups and address business challenges. Chugin Bank established its startup investment arm in 2022, Kyoto Bank in 2023, and Fukushima Bank in 2025.