Announcing the recommendations, the FSA said, "As the (Japanese) population continues to decline, it's not realistic for all financial institutions to maintain profit levels through an expansion of loan volume," Reuters reported.
"It is becoming more important that they control the size of their assets and build more stable profit structures."
Nonetheless, Christopher Dembik, head of macro analysis at Saxo Bank, was optimistic that the FSA's new guidelines would be a step in the right direction in terms of reviving economic growth for Japan.
"The monetary and fiscal stimulus cannot have the desired impact on GDP (gross domestic product) growth and inflation if the banks do not play their role as providers of loans to the economy," he told CNBC in an email.
"In the banking sector, a mentality switch is needed urgently in order to help the government and the BoJ to reach their goals."
Other financial regulators have not given guidance advising banks to take a more bold approach when lending to prospective businesses or companies.