[DigitalToday reporter Jinju Hong (홍진주)] Japan's Financial Services Agency is pushing to compile a fiscal 2027 budget of about 40 billion yen, the largest on record. A key aim is to strengthen oversight of crypto operators while sharply expanding AI-based market surveillance and cyber security response capabilities.

CoinPost, a blockchain media outlet, reported on Monday that the agency has begun adjusting its fiscal 2027 budget plan toward 40 billion yen, about 60 percent more than the previous year. The final budget is expected to be confirmed after review by Japan's Ministry of Finance.

The core of the budget increase is strengthening regulators' supervisory capacity to respond to the digital finance environment. The agency plans to build a foundation for monitoring and surveillance of financial markets using AI and to strengthen cyber security measures for financial institutions.

It is also pushing to build a security framework to prepare for the emergence of quantum computers. The agency plans to support a shift to post-quantum cryptography, which is harder to decrypt even with quantum computers, to address threats that current cryptographic systems cannot easily handle.

The crypto sector is also a direct target of the budget increase. The agency plans to strengthen its monitoring system for crypto exchange operators and expand specialist staffing to respond to risks that so-called frontier AI could pose to financial markets and cyber security.

A recent overhaul of the supervisory framework also aligns with the budget increase. On Aug. 7, the agency released a draft revision of supervisory guidelines to standardise reporting forms that financial institutions must submit when cyberattacks or system disruptions occur. The changes cover 17 areas, including crypto exchange operators, and public comments will be collected until Sept. 7.

The budget plan also includes support for regional financial institutions beyond the broader financial market. The agency plans to promote demonstration projects and talent matching so regional banks and credit associations can support growth and business restructuring for local companies.

It will also conduct training for employees of regional financial institutions. To raise expertise among staff at regional banks, credit associations and credit cooperatives, it will run training programmes and strengthen links with the Organization for Revitalization of Regional Economies and securities firms.

An organisational reshuffle is also being pursued. To respond to recent incidents at credit associations and credit cooperatives, the agency is considering establishing an "Inspection Planning Office" to serve as a control tower for inspection work on financial institutions. Plans also include expanding staffing to handle monitoring of crypto exchange operators and responses to frontier AI.

If the agency's budget expands from the 20 billion yen range to 40 billion yen, Japan's supervisory intensity over digital finance, including crypto, is expected to rise further. A key point of interest is how much systems and staffing will actually be expanded to respond to emerging technology risks such as AI-based market surveillance, cyber security and post-quantum cryptography.

Still, the 40 billion yen figure is not yet final. The agency's request could be adjusted after review by the Ministry of Finance. How much manpower and resources will be devoted in practice to stronger crypto oversight, along with the final budget size, is expected to be a key focus going forward.