Message from the Director Overview Research Areas Endorsements from Abroad

Message from the Director

Center for Advanced Research in Finance
Kenich Ueda Director
Center for Advanced Research in Finance
Kenich Ueda


My name is Kenichi Ueda, and I am the new Director of the Center for Advanced Research in Finance (CARF) since April 2022. The core mission of the Center remains the same.

CARF aims to play a central role in financial research in the Asia Pacific region. Our mission is to contribute to the sound development of the economies of Asia and the world through the promotion of theoretical and practical financial research. In order to achieve this objective, CARF endeavors to be a research center that is open to scholars from around the world.

With the importance of Asian economies and Asian firms growing rapidly in the global economy, Japan’s financial and capital markets should play an active role in the development of the Asian economic region. Among neighboring Asian countries, which are achieving rapid economic growth, there are some countries that are still in need of large amounts of capital.

At the same time, the aging of Japan’s population and the associated deterioration of public finances have made it necessary for Japanese households to engage in smart saving and investment  to ensure they have sufficient funds for retirement.—Research on aging-related savings and social security has been also conducted at CARF.—However, the accumulated funds and the decline in the population have led to a decline in investment opportunities in Japan, making it inevitable that more investments will be made in neighboring Asian countries, where the demand for capital is strong. That said, similar demographic challenges are also faced by countries like South Korea and China, so that these challenges must be viewed as an issue not only for Japan but for the entire Asian region.

In other words, what is needed is a greater integration of capital flows within Asia and around the world in terms of both the demand and the supply side. However, rapid capital movements on a massive scale have been said as a factor behind a range of financial crises, such as the real estate price bubble and subsequent banking crisis in Japan and various currency and balance of payments crises around the world, so that there is an understandable sense of caution in many countries.

Under these circumstances, how should Japan’s markets and financial system become in order to fulfill their function as a financial center in the Asian Pacific Rim? And what kind of messages should Japan  send to Asian countries and the world? Designing an optimal financial system and proposing related policies are the most important research areas of CARF. In particular, an important role of CARF is to conduct research from a variety of perspectives—micro and macro, theoretical and empirical—on the successes and failures of Japan’s financial system in the past and to apply the findings to help shape future financial and economic developments in Japan and neighboring Asian countries.

Meanwhile, from a more practical perspective, it is essential for corporations and investment funds to continually improve methods related to their investment  strategies, financing arrangements, and risk management. Research in financial theory to promote innovative advances in each of these areas is important for all countries. These areas are major topics that CARF has been working on. Moreover, an internationally harmonized and easy-to-understand accounting system is the foundation for corporate finance and investments in firms. Good accounting practices, corporate governance, and creditor and debtor protection, as well as their international harmonization, are essential for safely developing countries’ financial and capital markets and for promoting investments across countries. These are also major topics that CARF has been conducting research on.

In recent years, consideration of environmental, social, and corporate governance (ESG) factors has become an important part of the investment process, especially in the case of investments in developing countries. In fact, together with a growing focus on climate change risks, ESG criteria have become an unavoidable part of investment decisions. CARF has responded to these developments by holding international conferences and further enhancing its research activities on these subjects in the various research areas mentioned above.

Moreover, new developments have been rapidly emerging not only in the fields of investments and savings but also in the field of payment systems. Recent years have seen innovations such as fintech, crypto assets, and central bank digital currency. In this area, CARF has been a pioneer in research, becoming Japan’s center of excellence. CARF will continue to make efforts to deepen related research and disseminate the findings as international competition in payment systems intensifies and the need for harmonization becomes ever more important.

CARF promotes research in these diverse areas on the basis of three principles. First, CARF engages in cutting-edge theoretical and empirical research by hosting scholars from around the world to address issues facing Asia and the world. In order to do this, CARF has been forging close relationships with major universities and research institutions worldwide.

Second, CARF engages in research projects developed in cooperation with industry and government. By combining the knowledge, experience, and practical expertise of those directly involved in business, markets, and economic policy-making with academic theory and ways of thinking, we hope to propose better institutions and policies for the proper functioning of the financial system. Similarly, together with practical knowledge, we also hope to develop innovative techniques for investment, financing, and risk management.

Third, CARF is building a strong database environment essential for deepening research in the field of financial economics. CARF is advancing empirical research by gathering researchers from Japan and abroad and providing them with access to extensive financial and economic data, both at the micro and the macro levels, with special emphasis on Asian financial and capital markets. With the rapid advances in digitalization, new, more detailed databases are becoming available. While these are not always cheap and the costs are increasing from year to year, we will continue to enhance our database environment to allow us to remain a top center for research in financial economics.

The outcomes of research conducted at CARF are actively circulated worldwide in a variety of forms such as articles in academic journals, working papers, and book publications, in addition to being presented on our website and at workshops and international conferences. CARF will continue to strive to meet the expectations placed on us to be a world’s leading center for financial research.

Center for Advanced Research in Finance
Kenich Ueda


The Center for Advanced Research in Finance (CARF) was established at the University of Tokyo in April 2005 with the aim of building an international hub for financial research and education in Asia.

CARF pursues the following missions:


Pursue cutting-edge research in financial theory by inviting leading researchers from around the world.


Build a financial data center offering rich data both in terms of quantity and quality and pursue empirical research on financial and capital markets in Asia.


Analyze the successful and unsuccessful elements of Japan’s financial system from both a theoretical and empirical perspective to provide support for a balanced development of Asian economies. Make proposals for the design of financial systems and policies to promote sound economic development.


Develop financial researchers and leaders for the 21st century by conducting research utilizing industrial and financial partnerships, as well as develop innovative techniques for fund management, financing, and risk management.

CARF has received approval from the Ministry of Education, Culture, Sports, Science and Technology (MEXT) as an institution for collaboration between industry and academia. The Center is funded by the Japanese government and also receives financial support from a wide range of business and financial partners.

Past Directors


April 2005-March 2008 Junichi Ujiie
April 2008-October 2011Keimei Kaizuka
November 2011-February 2014 Tomio Arai
March 2014-March 2016 Kazuo Ueda
April 2016-March 2017Tsutomu Watanabe
April 2017-March 2022 Kazuo Ueda
April 2022-Present Kenichi Ueda


Research Areas

Research at CARF can be divided into the following four major areas.
Until fiscal 2020, “The Financial System” and “Macroeconomic and Financial Issues” were grouped as one research area.


The Financial System

One central research question in this area is why financial crises occur and what kind of financial regulations and supervisory policies should be adopted to enhance the robustness of the financial system without compromising its efficiency. While research on this topic has made considerable progress since the Japanese banking crisis and the global financial crisis, providing, for example, the impetus for international financial regulations, there is still much that needs to be resolved from both a theoretical and an empirical perspective.

Moreover, new issues have emerged, such as how the recent rise of fintech firms, crypto-assets, and digital currencies affects financial intermediation, and whether there is room for improvement in existing financial regulation. Awareness of new risks, such as risks associated with climate change, is also rising. Especially for the insurance industry it is necessary to estimate the potential losses, which may reach a different order of magnitude from those assumed so far. Further, climate change will also pose new risks in bank lending since it will have a wide-ranging impact on firms more generally.

The underlying policies and institutions that shape corporate finance are also important. For instance, Japan’s long-term economic stagnation from the 1990s onward saw the rise of so-called zombie firms – an issue that has been studied extensively – and there are concerns that recently many firms have similarly been artificially kept alive by government subsidies for firms and lending by government-sponsored financial institutions in the wake of the global financial crisis, the Tohoku earthquake, and the COVID-19 pandemic.” On the other hand, corporate financing through private-sector funds relies on many laws and codes, including corporate governance practices and insolvency resolution processes. The shape that corporate finance should take has become an issue of great social interest.

The issues related to financial crises, the response to new developments in finance, and the structural issues surrounding corporate finance all pose an urgent agenda for the institutional design of the financial system. Researchers at CARF will examine these issues through academic research and find a better design of the financial system in collaboration with practitioners and policy makers. 

Macroeconomic and Financial Issues

Research in this area focuses mainly on prices and monetary policy; issues related to bubbles; the linkages among social security, fiscal policy, and the macroeconomy; and the implications of these issues for international finance. In addition to academic research, activities in this area will consist of working with practitioners and policy makers to elucidate these issues.
With regard to prices, the aim is to explore how “micro-level prices,” i.e., the prices of individual goods and services, are determined and how they are linked to “macro-level price index.” Moreover, work in this area will focus on exploring the reasons for price fluctuations in different countries, including Japan’s prolonged deflation, and develop a price index that conforms with consumers’ perceptions of price developments.

The problem of bubbles is exemplified by Japan’s land price bubble of the 1980s and the subprime housing bubble of the 2000s in the United States. Work will examine the mechanisms of such sharp rises and falls in asset prices, how they are linked to macroeconomic fluctuations, and how institutions and policies affect them.

In the medium to long term, the macroeconomy and financial activities are influenced by structural factors linked to the balance of savings and consumption, such as the aging of the population. One strand of work is to examine these mechanisms both theoretically and empirically. A question of particular interest from a macroeconomic perspective is the efficiency and robustness of the financial system in channeling savings to investment.

Furthermore, in internationally open countries such as Japan, macroeconomic conditions have substantial impacts on developments in exchange rates and the current account. Research in this area will therefore also pay attention to aspects of international finance. In particular, investment in developing countries requires taking sustainable development goals (SDGs) into account, such as goals regarding the environment and labor standards. Against this background, developments in socially responsible investment, or so-called ESG investment, are another issue that will be examined.

Quantitative Finance

Research under this topic focuses on proposing various new asset management methods using state space models, fuzzy systems, and machine learning. In addition, the aim is to propose new methods of assessing and calculating the value of financial assets taking a variety of factors that have received considerable attention in recent years – such as credit risk, collateral contracts, and changes in volatility – into account and to provide a mathematical basis for these methods. Furthermore, research under this topic seeks to examine the pricing of derivatives based on low-liquidity underlying assets, analyze high-frequency trading markets using big data, and examine revenue management by hotels.


Research under this topic seeks to examine the role accounting information plays in securities markets and in the settlement of interests between parties. In addition, research focuses on what kind of theories support the system of accounting standards on which the generation of accounting information is based and examines the rationality of these theories. Specifically, work has been going on for many years on how the International Financial Reporting Standards (IFRS) can be incorporated into the Japanese securities market. More recently, work has also focused on ex-post evaluations comparing the expected effects of introducing new accounting standards with existing standards and examining the reasons for any differences.

Other research consists of comprehensively exploring the characteristics of firms that commit accounting fraud and trying to build a model that predicts accounting fraud based on these characteristics, as well as attempting to clarify the role of accounting information in executive compensation contracts.



Endorsements from Abroad

William F. Sharpe
STANCO 25 Professor of Finance, Emeritus, Stanford University

Myron S. Scholes
Frank E. Buck Professor of Finance, Emeritus, Stanford University, Chairman of Oak Hill Platinum Partners

Stanley Fischer
Governor of the Bank of Israel

Robert C. Merton
John and Natty McArthur University Professor, Emeritus, Harvard Business School, Harvard University

Stephen A. Ross
Franco Modigliani Professor of Finance & Economics, Massachusetts Institute of Technology (MIT)

Alan S. Blinder
Gordon S. Rentschler Memorial Professor of Economics and Former Co-director of the Center for Economic Policy Studies at Princeton University

Bruno Solnik
Distinguished Emeritus Professor of Finance, HEC School of Management (France)

Stephen H. Penman
George O. May Professor of Accounting and Morgan Stanley Research Scholar, Columbia University

Douglas T. Breeden
William W. Priest Professor of Finance, Duke University, Former Dean of Duke’s Fuqua School of Business since 2001

Darrell Duffie
Dean Witter Distinguished Professor of Finance, Stanford University

Franklin Allen
Nippon Life Professor of Finance, University of Pennsylvania

Anil Kashyap
Edward Eagle Brown Professor of Economics and Finance, University of Chicago