FOREWORD

The Japanese securities market is confronting a major change in environment, triggered by liberalization and globalization of financial markets, rapid progress in communications and information technology, and the aging of the society. Japan faces a major challenge in preparing a securities market fit for the 21st century under a medium- and long-term perspective.

With this in mind, the Securities and Exchange Council established the General Committee to conduct a comprehensive review of the securities market, its intermediaries, and administration of the market.

In November last year, the Prime Minister issued a directive concerning Financial System Reform, aimed at rejuvenating the Japanese financial market, under the three principles of Free, Fair and Global, so that by 2001, the beginning of the 21st Century, the Japanese market will rival those in New York and London. The Finance Minister invited the Securities and Exchange Council to present a plan of action for the securities market, that will be required to meet this objective.

The General Committee met 23 times in all, making publicly available interim results of its deliberations at main junctures in the course of its discussions. In November last year, the Committee published the document, `Issues for Discussions', which described the Committee's views on the issues that need to be tackled, basic philosophy and vision concerning the securities market reform, and the general direction of the reform that need to be pursued. From January, the Committee met under three Working Parties (Investment Product WP, Market WP, Market Intermediary WP), a total of 24 sessions to discuss specific reforms for individual items subject to review, within the overall framework set by the `Issues for Discussions' paper. The three Working Parties issued their reports on 16 May.

The Derivatives Special Committee also met a total of 16 times to

discuss issues relating to derivatives transactions, and issued its

report on 20 May.

The reform of the securities market must be a national effort. The `Issues for Discussion' and the Working Parties' reports were therefore disseminated immediately upon publication, using such media as the Internet, and opinions were widely sought. The Committee received a large number of responses. In addition, to seek opinion from a broad section of the public including investors and issuers, some 500 interviews were conducted by the Council's Secretariat. Opinion collected through these routes were summarized and published by the Secretariat, and was an important material for the discussions of the Council. The Council thanks those who have shared their thoughts with it.

To make this reform a truly national one, the problems currently confronting the market must be overcome, and the market must regain its trust of the people.

The Securities and Exchange Council is presenting here its report recommending a comprehensive reform of the securities market, based upon the work of three Working Parties and the Derivatives Special Committee. The Council recommends that the reform should be undertaken along the timetable proposed in this report.

The Council hopes that, by carrying out this reform, the market will

enhance its attractiveness and competitiveness, and become a market

that is trusted by its users, so that it can fulfill the role expected

of it in the 21st Century.


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