# Japan FSA AI Discussion Paper v1.0: AI Discussion Paper (Version 1.0): Preliminary Discussion Points for Promoting the Sound Utilization of AI in the Financial Sector

Source: https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025
Last updated: Oct 5, 2026

The Japan Financial Services Agency published its AI Discussion Paper (Version 1.0) in Japanese on 4 March 2025, with an English version on 10 April 2025, as an initial set of discussion points for the sound use of AI by financial institutions. It draws on a survey of 130 firms (3 October to 15 November 2024) and interviews, sorts challenges into those common to conventional and generative AI, those made harder by generative AI and those newly created by it, and stresses the 'risk of inaction'. It is non-binding and says the FSA's basic stance is technology-neutral, with existing laws applying whether or not AI is used. The FSA updated it as Version 1.1 on 3 March 2026, which supersedes this version.

## At a glance

| Field | Value |
| --- | --- |
| Authority | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) |
| Type | Report |
| Status | Superseded |
| Published | Mar 4, 2025 |
| Applies to | Financial institutions in Japan, including deposit-taking institutions (about 40% of survey respondents), financial instruments business operators and insurers. It is a discussion paper: it states that it does not express the FSA's monitoring viewpoints or specific actions expected of institutions, and existing laws apply regardless of whether AI is used |
| Official text | https://www.fsa.go.jp/en/news/2025/20250304/aidp.html |

## Key points

- Chapter II: the paper does not express the FSA's monitoring viewpoints or the specific actions expected of institutions; it summarises use cases, challenges and governance examples from a survey of 130 firms (3 October to 15 November 2024) and interviews, and chapter IV 'should not be interpreted as requiring all mentioned challenges to be addressed before AI can be adopted'.
- Chapter I: the FSA's basic stance is technology-neutral and existing laws and regulations apply regardless of whether AI is used; it will make efforts to provide safe harbours by clarifying how regulation applies, and says it will review laws, regulations or guidelines if needed given AI's characteristics.
- Chapter III: more than 90% of surveyed institutions use conventional or generative AI in some way; use cases are grouped as internal use, indirect customer-service use and direct customer-service use.
- Chapter IV.1: challenges common to conventional and generative AI (data preparation, external vendors and risk management, return on investment); challenges made harder by generative AI (explainability, fairness and bias, development, operation and model risk management, personal information protection, information security and cybersecurity, specialist personnel); new challenges (hallucination, misuse for financial crime, financial system stability).
- Chapter IV.2: institutions' governance initiatives, including internal AI policies and rules.
- Chapter IV.3: demand for regulatory clarification ranked personal information protection, IT governance, model and risk management, and cybersecurity; the FSA will first consider revising principles and guidelines before legal responses, which it does not exclude where significant gaps exist.
- The FSA planned a Public-Private Stakeholder Study Group within the fiscal year (the FSA then held its AI Public-Private Forum from June to December 2025) and to update the paper as necessary; the paper also describes the Fintech Support Desk, which had handled 2,380 consultations from 2015 to December 2024.
- Chapter V describes the FSA's own use of AI in supervision.

## What changed for banks

It was the FSA's first consolidated statement on AI in finance and set a pro-adoption, dialogue-based tone: no new AI rulebook, existing laws apply, and the 'risk of inaction' is a stated concern. Banks use it to see how the FSA frames explainability, vendor risk, model risk and cyber risk for AI, even though it imposes no new obligations. Version 1.1 (3 March 2026) now supersedes it.

## Use cases it governs

- [AI governance (general)](https://www.bankingnewsai.com/ai-regulation/by-use-case#governance-general)
- [Generative & agentic AI](https://www.bankingnewsai.com/ai-regulation/by-use-case#generative-agentic-ai)
- [Model risk management](https://www.bankingnewsai.com/ai-regulation/by-use-case#model-risk)
- [Third-party & vendor AI](https://www.bankingnewsai.com/ai-regulation/by-use-case#third-party-vendors)
- [Data & privacy](https://www.bankingnewsai.com/ai-regulation/by-use-case#data-privacy)
- [Customer-facing chatbots](https://www.bankingnewsai.com/ai-regulation/by-use-case#customer-chatbots)

> Superseded by [Japan FSA AI Discussion Paper v1.1](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-v1-1-2026).

## What did the Japan FSA's AI Discussion Paper Version 1.0 say financial institutions should do?

The FSA's AI Discussion Paper (Version 1.0), published 4 March 2025, imposes no new obligations: it says existing laws apply technology-neutrally, and that it does not state the FSA's monitoring viewpoints or specific expected actions. It expects institutions to identify and assess AI risks under a risk-based approach and with strong management involvement, to take on challenges proactively without being unduly deterred, to review business processes around AI, to develop use cases and to involve senior management. It organises the main challenges (data, vendors, explainability, bias, model risk, privacy, cybersecurity, hallucination, financial crime and stability) and records examples of governance, and the FSA says it will clarify regulatory application through dialogue and consider revising principles and guidelines first. Version 1.1 of 3 March 2026 supersedes it.

| Rule | Authority | What it requires | Status | Source |
| --- | --- | --- | --- | --- |
| Chapter I — Technology-neutral stance | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Existing laws, regulations and guidelines apply regardless of whether AI is used; the FSA will clarify application and review rules if necessary. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |
| Chapter IV.1.① — Common challenges | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Address data preparation, external vendor collaboration and risk management, and return on investment for both conventional and generative AI. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |
| Chapter IV.1.② — Challenges made harder by generative AI | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Handle explainability, fairness and bias, model and risk management, personal information, information security and cybersecurity, and specialist talent. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |
| Chapter IV.1.③ — New challenges from generative AI | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Manage hallucination, misuse for financial crime and financial stability issues. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |
| Chapter IV.2 — AI governance | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Develop internal AI policies and rules and other governance initiatives suited to the institution. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |
| Chapter IV.3.② — Expectations of business operators | [Japan FSA](https://www.bankingnewsai.com/ai-regulation/japan-fsa) | Review business processes, support proactive development of AI use cases and involve management proactively. | Discussion paper, 4 March 2025 | [Japan FSA AI Discussion Paper v1.0](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-2025) |

The paper is explicit that it is a foundation for dialogue. It says the FSA will explore the issues through ongoing dialogue and will take necessary actions such as updating the paper and clarifying the application of regulations. In the direction-of-response section, it says legal regulation should be limited to areas where self-regulation cannot be expected, so principles and guidelines would be revised first.

The survey base is voluntary and the paper declines sector-level analysis, so it should be read as a snapshot of practice at Japanese institutions in late 2024. The FSA's own later materials (Version 1.1) update the picture, noting rapid growth in customer-facing AI.

### What this means in practice

- Use the three-way classification of challenges as a framework for an AI risk assessment.
- Remember existing Japanese laws and supervisory guidelines apply to AI use; the paper adds no exemption or new rule.
- Document senior management involvement in AI strategy and risk decisions.
- Read Version 1.1, which supersedes this version, for the current FSA position.

## FAQ

### Does the Japan FSA AI Discussion Paper apply to banks?

It addresses financial institutions including banks (deposit-taking institutions were about 40% of survey respondents) but is a discussion paper that creates no new obligations. Existing laws, regulations and supervisory guidelines continue to apply regardless of whether AI is used.

### Is the Japan FSA AI Discussion Paper binding?

No. Chapter II says it does not express the FSA's monitoring viewpoints or specific actions expected of institutions, and that chapter IV should not be read as requiring all challenges to be solved before adopting AI.

### Is Version 1.0 still current?

No. The FSA updated the paper as Version 1.1 on 3 March 2026 after the June to December 2025 FSA AI Public-Private Forum, so this version is marked superseded.

### How does the FSA approach differ from the EU AI Act?

The EU AI Act is binding legislation with risk categories. The FSA paper is a non-binding discussion document that keeps a technology-neutral stance, applies existing rules to AI and plans to revise principles and guidelines before considering legal changes.

## Related documents

- [Japan FSA AI Discussion Paper v1.1](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-ai-discussion-paper-v1-1-2026) — AI Discussion Paper (Version 1.1): Preliminary Discussion Points for Promoting the Sound Utilization of AI in the Financial Sector (Mar 3, 2026)
- [Japan FSA/BOJ frontier AI request](https://www.bankingnewsai.com/ai-regulation/documents/japan-fsa-boj-frontier-ai-request-2026) — Request regarding 'Short-term Responses by Financial Institutions in Light of Threat Changes from Frontier AI' (「フロンティアAIによる脅威変化を踏まえた金融機関等の短期的な対応」に係る要請について) (May 22, 2026)
- [SB 947](https://www.bankingnewsai.com/ai-regulation/documents/ca-sb-947-2026) — Employment: Automated Decision Systems (No Robo Bosses Act) (Sep 30, 2026)
- [Bailey: Frontier AI and the Question of Governance (Sep 2026)](https://www.bankingnewsai.com/ai-regulation/documents/boe-bailey-frontier-ai-governance-2026) — Frontier AI and the Question of Governance — Governor Andrew Bailey (Sep 30, 2026)
- [AB 1609](https://www.bankingnewsai.com/ai-regulation/documents/ca-ab-1609-2026) — Customer Service Chatbots (Right to Human Customer Service Act) (Sep 28, 2026)
- [Atkins remarks at Investor Advisory Committee (Sep 2026)](https://www.bankingnewsai.com/ai-regulation/documents/sec-atkins-iac-ai-disclosure-remarks-2026-09) — Remarks at the SEC Investor Advisory Committee Meeting on AI Technologies and the Public Markets Information Ecosystem (Sep 10, 2026)
- [FCA multi-firm review: Frontier AI and cyber resilience (Sep 2026)](https://www.bankingnewsai.com/ai-regulation/documents/fca-frontier-ai-cyber-resilience-2026) — Frontier AI and Cyber Resilience (Sep 2, 2026)
- [FSB Chair's letter to G20 (Aug 2026)](https://www.bankingnewsai.com/ai-regulation/documents/fsb-chair-letter-g20-august-2026) — FSB Chair's letter to G20 Finance Ministers and Central Bank Governors: August 2026 — risks arising from frontier artificial intelligence models (Aug 31, 2026)

Last reviewed Oct 5, 2026. Cite the official text (https://www.fsa.go.jp/en/news/2025/20250304/aidp.html) for the rule and this page for the summary and dates.

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