AI Governance in Japan by Industry: Finance, Healthcare, Manufacturing, and the Soft Law Approach

Understanding Japan's soft law AI approach

Japan has deliberately chosen a governance approach that prioritises flexibility and industry innovation over prescriptive regulation. The AI Promotion Act, enacted on 28 May 2025 (in force from 4 June 2025, full enforcement September 1, 2025), is the primary legislative framework — but it is explicitly non-binding on most actors, establishing principles and creating ministerial authority to issue guidance rather than directly mandating compliance. Note: Japan's 'AI Guidelines for Business' were published separately by METI and MIC in April 2024. This approach reflects Japan's industrial policy priority of AI leadership and its concern that prescriptive regulation would disadvantage Japanese companies relative to US competitors who operate under more permissive domestic regulation.

For Japanese companies and international companies operating in Japan, the practical implication is that AI governance compliance is primarily about alignment with voluntary guidelines and sector guidance — with the METI guidelines as the primary cross-sector reference and sector-specific guidance from FSA, MHLW, and other ministries as the relevant standards for regulated industries.

Financial services: FSA guidance

The Financial Services Agency has been the most active Japanese regulator on AI governance. FSA guidance on AI in financial services addresses: model risk management for AI and ML models used in investment, credit, and insurance decisions; explainability requirements for AI used in customer-facing financial services; cybersecurity of AI systems; and third-party AI vendor oversight. Japanese financial institutions should treat FSA guidance as supervisory expectations — while not legally binding in the same way as an FSA rule, failure to align with FSA guidance creates supervisory risk.

Manufacturing: METI AI governance for industrial AI

Japan's manufacturing sector is a major adopter of AI — predictive maintenance, quality control AI, autonomous logistics, and AI-driven production optimisation are widespread in major Japanese manufacturers. METI has published AI governance guidance specifically addressing industrial AI, with emphasis on safety, reliability, and human-AI collaboration in manufacturing environments. The guidance addresses: safety verification for AI in safety-critical manufacturing processes, AI system documentation and audit trails, and AI governance in global supply chains involving Japanese manufacturers.