1. Investment products = (offering of attractive investment products)

The securities market should be able to contribute to the formation of national financial assets for the newly 'grayed' Japan through providing attractive and competitive products at low costs to investors with diversified needs. To let the market play such a function, it is necessary to improve product quality, while management attitudes and information disclosure by securities issuers in light of investors' viewpoints are also important.

The offering of such attractive investment products constitutes the foundation for vitalizing the market.

<Specific Issues for Discussion>

o Diversification of products

Some of the products offered in other countries are not traded in Japan because of provisions of criminal, commercial and other laws. Discussions should be carried out to introduce such products for the diversification and expansion of products.

・ Derivative products, etc.

It is necessary to introduce new products to offer a variety of hedging measures and to improve investment performance. In light of this, the environment should be improved for the expansion of stock-related derivative and bond futures/option trading.

・ Definition of securities

The advancement of financial technology has led to the emergence of a variety of products including asset finance securities. Under such circumstances, some people argue that the definition of securities in the Securities Exchange Law is impeding the development of new products, or that it is necessary to discuss the proper form of definitions. How should we deal with such arguments?

o Investment Trust

Investment trust is expected to play the core role in offering a convenient, effective asset investment tool to many and unspecified people, mainly individual investors. In light of this, we belive that we ought to discuss measures to improve convenience, diversify products and expand sales channels.

o Enhancement of corporate vitality

Companies in need of funding strongly require the introduction of measures to facilitate and give flexibility to procedures for the issuing of ABS (Asset Backed Securities), MTN (medium term notes), DR (depository receipts), stock options, and stocks. How can ideas presented by laws including commercial laws be organized in preparation for their introduction or the expansion of their usage?

o Enhancement of attraction of stocks

To call back individual investors to the stock market, it may be necessary to secure fair value of stocks as well as to enhance investment value of stocks that are objects of investment. It may also be necessary to consider measures to make stock investment more familiar to individual investors. Some people argue that it is useful to summarize ideas of commercial laws with regards to this. How should we consider this opinion?

・ Payout ratio

Is it not necessary to reform the dividend policy, to abandon the par value dividend principle and shift to a dividend policy to consider payout ratios and ROE? By what measures can "the reformation of consciousness" be guided?

・ Taxation system

Is it necessary to revise dividend taxation to enhance the attraction of stocks as an object of investment?

・ Acquisition of own stocks for writing off profit

The acquisition and writing off of own stocks can be an effective measure to improve financial indicators such as ROE and to rebate surplus funds to stockholders. How can ideas in commercial laws be adjusted in this regard?

・ Mutual holding of stocks

Some people argue that mutual holding of stocks for non-financial motives distorts price formation and negatively affects the maintenance of fair stock values. They therefore claim that it is desirable to abandon such practices even though it has its benefits. Others insist that it is unnecessary to exclude stock holding from non-financial motives and that the influence on stock price formation may not be a "distortion". How should we consider such differences in opinion?

・ Investment unit of stocks

Are companies required to take more positive measures to make stock investment units smaller to make stock investment closer and easier for individual investors? Some people insist that ideas presented by commercial laws should be adjusted with this regard. How should we consider such opinions?

o Expansion of offering of information

For answering diversifying investor needs and encouraging individual investors, it may be important to expand information which investors can refer to when making judgments. Accordingly, it may be desirable to secure timely disclosure, promote IR, and develop industries related to securities market information.

o Reduction of product offering costs

For enhancing the attraction of investment products, how should the securities transaction tax, one of the transaction costs, as well as commissions mentioned below, be regarded?

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