June 6, 2008
Financial Services Agency

FSA Statement following the enactment of the Bill for Amendment of the Financial Instruments and Exchange Act, etc.

Earlier today, the Bill for Amendment of the Financial Instruments and Exchange Act, etc., was passed by the Diet (Japanese parliament).

The objective of this legislation is to put into force a number of measures incorporated in the Plan for Strengthening the Competitiveness of Japan's Financial and Capital Markets, which was announced on December 21, 2007. The measures are intended to ensure that Japan's financial and capital markets appropriately meet the various needs of investors and fund-raisers, both domestic and foreign, making the markets more attractive to their participants.

The Plan is a comprehensive policy package that puts together the measures necessary to raise the competitiveness of Japan's markets, and consists of the following four pillars:

  • Creating reliable and vibrant markets;
  • Putting in place a business environment that vitalizes the financial services industry and promotes competition;
  • Improving the regulatory environment ("better regulation"); and
  • Improving the broader environment surrounding the markets.

The following is some of the main items of the amendment:

Creating reliable and vibrant markets

  • Creation of new exchange markets exclusively for professional investors that are exempt from current disclosure requirements, while securities exchanges can set their rules regarding provision of information on their own initiatives.
  • Diversification of exchange-traded funds (ETFs), by introducing ETFs investing in commodity futures.
  • Review of the system of administrative monetary penalties, including raising the amount of penalties imposed and expanding the coverage of violations subject to these penalties.

Putting in place a business environment that vitalizes the financial services industry and promotes competition

  • Revamp of the firewall regulations among securities firms, banks, and insurance firms.
  • Broadening of the scope of businesses permitted to banking and/or insurance groups (e.g., emissions trading, commodity spot trading).

Moreover, the Financial Services Agency (FSA) has been implementing steadily the measures referred to in the Plan that do not require legislation. They include:

Creating reliable and vibrant markets

  • Broadening of the scope of disclosure in the English language to all types of securities issued by foreign issuers (effective June 1, 2008).
  • Issuance of draft regulation to enable diversification of ETFs, including introduction of ETFs investing in securities other than stocks (draft regulations to this end were issued for public consultation on May 9, 2008).

Putting in place a business environment that vitalizes the financial services industry and promotes competition

  • Efforts to minimize the "PE (permanent establishment) risk" in order to attract foreign fund managers to the Japanese markets (The relevant Cabinet Order was amended on April 30, 2008; intensive work is underway with tax authorities to clarify the details).

Improving the regulatory environment ("better regulation")

  • Agreement with financial service providers to share the "Principles in the Financial Industry" (April 18, 2008).
  • Release of the first progress report on the efforts toward "better regulation" (May 19, 2008).

Improving the environment surrounding the markets

  • Publication of a proposal for ways to develop human resources specialized in finance (April 30, 2008).
  • Development of the "Plan to Enhance Japan's Role as an International Financial Center" by the government's Joint Headquarters for Revitalization of Local Areas (April 11, 2008).

Following the passage of the bill, Yoshimi Watanabe, Minister for Financial Services, said:

"I would like to thank Diet members and all other relevant parties for their understanding and support of the bill. The FSA published the Plan for Strengthening the Competitiveness of Japan's Financial and Capital Markets last December, and has been strongly pushing forward the reform of the Japanese markets. The amendment includes measures necessary to raise the competitiveness of Japan's markets in a comprehensive manner. The passage of the bill is therefore a big step forward in materializing this reform, together with the measures implemented that do not require legislation such as the efforts toward 'better regulation.' In addition, I believe the fact that the bill was passed by the Diet in the current session sends a clear message that strengthening the competitiveness of the financial and capital markets is regarded as one of the most important strategic issues for Japan, and that this country is open to the world. The FSA is determined to continue its efforts to construct attractive financial and capital markets, to which capital, information, and human resources flow in from all over the world."

Contact information;

Financial Services Agency
Telephone: +81-(0)3-3506-6000 (main)
Financial Markets Division (ext. 3523)

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