Derivatives: Japan's Secret Weapon in Global Asset Management

In a blockbuster announcement from New York on October 16, 2025, the International Swaps and Derivatives Association, Inc. (ISDA) and Crisil Coalition Greenwich have brought to light the indispensable role that derivatives play in shaping Japan’s quest to stride globally in asset management. Yet, this journey is not without its hurdles.

Charting the Path Ahead

According to a detailed report compiled from discussions with 20 leading asset managers in Japan, a staggering 80% acknowledge the dominance of derivatives in steering investment strategies and objectives. With the Bank of Japan having concluded its eight-year policy of negative interest rates last year, expectations are ripe that the derivatives market will be the go-to space for navigating the waters of fluctuating interest rates.

A Vision for Expansion

A strong 89% of market participants envision derivatives as pivotal in aligning with and supporting the Japanese government’s asset management strategy. Since 2023, Japan’s Financial Services Agency has been relentlessly maneuvering—initiating strategies that bolster Japan’s stature as a formidable asset management nexus by breaking down barriers and diversifying investment channels.

Breaking the Chains: Challenges Remain

Despite the optimism, market players have flagged obstacles hindering the derivative landscape, including uneven liquidity in certain sectors, lagging electronic execution, regulatory and accounting hurdles, and a glaring dearth in local derivatives expertise.

Voices of Leadership: Moving Forward Together

Scott O’Malia, ISDA’s Chief Executive, fervently articulates, “Our report shows asset managers in Japan see real value in using derivatives to manage risk, enhance returns and enable product innovation—a catalyst for bringing vibrancy to Japan’s asset management sector.” As echoed by Stephen Bruel, Head of Derivatives and FX at Crisil Coalition Greenwich, “Removing the constraints will improve scale and efficiency, markedly boosting those benefits.”

A Call for Collective Action

As stated in Disruption Banking, the time is ripe for a unified effort among regulators and market participants to propel Japan’s derivatives market to its full potential. The ambition is to cement Japan’s position as an undisputed leader in global asset management.

The future beckons, and the possibilities are endless—derivatives could indeed be the defining force in Japan’s quest for asset management supremacy.