The Financial Conduct Authority (FCA) has entered into a cooperation agreement with its Japanese counterpart to support innovative fintech companies coming to market.
In an exchange of letters the regulators agreed on a regulatory referral system allowing businesses from Japan and the UK to enter the other's market.
The way the framework will work is for the regulator which receives the business referral, to provide support to the business by reducing regulatory uncertainty and the time it takes to enter the market.
The regulators also plan to share information about financial services innovation in their own markets and further encourage innovation in both countries.
FCA executive director of strategy and competition Christopher Woolard said: "We are committed to encouraging innovation that has the potential to be of benefit to consumers using financial services here in the UK.
"Today's exchange of letters with the Financial Services Agency of Japan will help break down barriers to entry both in Japan and in the UK for firms with interesting new business services and products."
He added promoting competition through innovation formed a significant part of the FCA's overarching statutory objective to make financial services markets work well.
For Japan, the agreement is expected to encourage Japanese startup companies to engage with innovative financial businesses globally and to attract UK companies to the Japanese market, which should contribute to stimulating the economy.
It is the first such agreement signed by the Japanese regulator. The FCA already has a similar agreement in place with the Canadian regulator, signed in February.
JFSA vice commissioner for international affairs Shunsuke Shirakawa said: "The UK is one of the world-leading FinTech countries, generating £6.6bn in revenue. We believe that this exchange of letters strengthens the relationship between the JFSA and the FCA and promotes innovation in our respective markets."
The agreement follows the establishment of the FCA's innovation hub for fintech businesses. Project Innovate, first announced by then chief executive Martin Wheatley in 2014, supports firms with new ideas wishing to enter the market.
The regulator also established a working unit for advisers wishing to bring automated advice to market.
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