1. The Scope and Schedule of the Reform
The problems that the Japanese securities market need to overcome
are rooted in wide-ranging factors. Rather than considering them
individually, the reform effort must be a comprehensive one that
reformulates the market framework in a manner that that encourages
development that is guided by market forces.
The importance of reorientation of regulatory philosophy and building
of market infrastructure cannot be overstated, but it is equally
important to recognize that these cannot be panacea. Rather, one
should consider restructuring of the market framework as a starting
point, from which users, intermediaries and operators of the market
must all strive to tackle the tasks that they face. The reform
of the securities market is a comprehensive package of program
and efforts that encompasses all market participants.
The Securities and Exchange Council proposes a reform package
outlined below. It also recommends that the individual items in
the package be implemented along a schedule laid out in the attached
table.
2. Phasing of the Reform
The phasing of individual items in the reform package must be
carefully thought out, if the market reform along this Council's
objectives are to be implemented in minimum time with maximum
results.
The phasing of the reform should reflect the following considerations:
A. In order to encourage creativity and effective competition,
so that market develops on its own accord, it is important to
create a framework in which a wide range of financial instruments
and services become available. Liberalization of prices and market
entry can have its intended effect only under these conditions.
B. Market reform will result in the emergence of a wide range
of financial products and transactions. It is important to review
investor protection measures, so that market rules can effectively
cover these new products and services. In addition, along with
measures to increase market entry and competition, it is essential
that measures to improve bankruptcy procedures and otherwise provide
for a non-disruptive exit of financial intermediaries, be put
into place before or in unison with measures to introduce a more
competitive environment.
Taking into account the effects that reform in one area may have
on others, the Council believes that the reforms should be implemented
in its entirety, including legislative initiatives, along the
aforementioned timetable.
For those measures requiring legislation, details should be worked
out by Fair Transaction and Market Infrastructure Subcommittees
of this Council in the coming months and presented to the Diet
for approval as soon as feasible.