The Financial Agency, which was launched Saturday in a major move to integrate the operating and planning roles of financial policymaking bodies, started actual operations on Monday. The new financial-watchdog body combines the Financial Supervisory Agency and the Finance Ministry's Financial Planning Bureau, drawing a line between financial and fiscal-policy functions. This effectively limits the Finance Ministry's powers to tax and spending policies.

The new agency, a part of the comprehensive government reorganization that will take full-scale effect next January, faces tough challenges. Its main task is to stabilize the financial system and make it internationally competitive through stepped-up liquidation of nonperforming loans held by banks and other financial institutions. That is an essential condition for the sustainable recovery of the Japanese economy.

At the same time, there are concerns about how it will perform. Chief among these is the worry that it may abuse its comprehensive regulatory powers -- a worry that was very much evident in the past when the Finance Ministry maintained a broad grip on the private financial sector. Another is over possible political intervention in, or pressure on, the agency's process of drafting financial rules and regulations. Keeping a safe distance from political influences is essential to securing transparency in the conduct of financial policy.