The Financial Services Agency of Japan (FSA) has been concerned about over-leveraging, particularly in the case of FX derivatives and contracts for differences.

For FX derivatives, a bill to introduce a restriction of 25 times on the leverage of over-the-counter (OTC) transactions of currencies-related derivatives was promulgated on 3 August 2009.

For contracts for differences, the FSA announced its intention on 21 October 2009 to introduce new regulations aimed at preventing individual investors from becoming over-leveraged in respect of OTC securities-related derivatives (that is, equity derivatives (single-share) and bond derivatives) transactions to which they are party. This new regulation will introduce restrictions (Leverage Restrictions) on the leverage of OTC derivatives with securities or indices as the underlying as follows:

The Leverage Restrictions will only apply to transactions where one party is a non-institutional investor.

It is anticipated that the Leverage Restrictions may be formalised as law possibly even before the end of 2010.