[Edaily Reporter KIM JUNG YOU ] Japan’s Financial Services Agency has stated that the sale in Japan of leveraged exchange-traded funds (ETFs) targeting individual stocks established overseas is “inappropriate in the public interest.”

According to a report by the Nikkei on the 28th, the FSA revised its Q&A regarding the Financial Instruments and Exchange Act the previous day. The revision has drawn attention as it includes provisions aimed at curbing the sale in Japan of leveraged ETFs established overseas by securities firms and other entities.

The FSA pointed out that the sale of leveraged ETFs tracking Japanese stocks could amplify price fluctuations of domestically listed stocks, potentially having a significant impact on price formation.

Currently, the listing of leveraged ETFs targeting individual stocks is not permitted in Japan. However, concerns have been raised that if leveraged ETFs linked to Japanese stocks are approved overseas, they could be sold to domestic investors through Japanese securities firms in the form of “foreign investment trusts.”

This message from Japan appears to be in response to the situation in South Korea. In South Korea, leveraged ETFs tracking the SK hynix(000660)and SamsungElectronics(005930)were listed last May, but stock prices fluctuated wildly as funds from retail investors poured in.

As concerns in the market grew, the South Korean government implemented stricter regulations, such as raising the margin requirements for trading and temporarily suspending new listings.

In response, Japan appears to be prioritizing market stabilization. In effect, it has taken preemptive measures before single-stock leveraged ETF products begin to expand in earnest within Japan.