Market infrastructure - Japan
Institutions and organisation
Stock Exchanges and related institutions
The Japan Securities Clearing Corporation (JSCC), was established by the stock exchanges and the Japan Securities Dealers Association (JSDA) to provide a unified clearing infrastructure to handle equities and fixed income instruments traded among all the stock exchanges in Japan.
The four stock exchanges in Japan are as follows:
- Tokyo (TSE);
- Nagoya;
- Fukuoka;
- Sapporo.
NB: The Tokyo Stock Exchange (TSE) and the Osaka Securities Exchange (OSE) merged on 1 January 2013 and are wholly owned by the holding company. Japan Exchange Group, Inc. (JPX), has been renamed to Osaka Exchange, Inc. which now manages derivatives only.
The exchanges are responsible for:
- Setting out listing and disclosure requirements for companies to be listed;
- providing corporations with a place to trade their securities issues and operating the market;
- Monitoring and supervising the listed companies and the trading participants.
Stocks listed on TSE and Nagoya Stock Exchange are divided into three markets:
TSE
- Prime market: For companies that have appropriate levels of market capitalisation (liquidity) to be investment instruments for many institutional investors, keep a higher quality of corporate governance, and commit to sustainable growth and improvement of medium- to long-term corporate value, putting constructive dialogue with investors at the centre.
- Standard market: For companies that have appropriate levels of market capitalisation (liquidity) to be investment instruments in the open market, keep the basic level of corporate governance expected of listed companies and commit to sustainable growth and improvement of medium- to long-term corporate value.
- Growth market: For companies that have a certain level of market value by disclosing business plans for realising high growth potential and their progress towards these appropriately and in a timely manner but at the same time pose a relatively high investment risk from the perspective of business track record.
NSE
- Premier market: Market for a company highly appraised in the market based on its excellent profit base and financial position. It is selectable for many investors, including individual investors, for a continuing shareholding.
- Main market: Market for a company having established its stable management base and having been favorably appraised in the market based on a certain level of business performance. It is selectable for many investors, including individual investors, for a continuing shareholding.
- Next market: Market for a company making timely and appropriate disclosures of its business plan with an outlook towards a future step up in its progress and the aim of future growth, currently being favorably appraised in the market to a certain extent.
Note: Approximately 50% of listed companies are classified under Prime Market of TSE and more than 60% of listed companies are classified under premier market of NSE. The other exchanges have two sections, main market and development market.
CSD - The Japan Securities Depository Center, Inc. (JASDEC -www.jasdec.com)
The Japan Securities Depository Center, Inc. (JASDEC) is governed under The Act on Book-Entry Transfer of Company Bonds, Shares, etc. and provides safekeeping and book-entry transfer facilities for listed equities and dematerialised securities, including investment trust beneficiary certificates, corporate bonds and convertible bonds.
In 2002, JASDEC changed its legal status from a non-profit foundation structure to a stock company.
Central Bank - The Bank of Japan (BOJ - www.boj.or.jp)
The Bank of Japan (BOJ) provides central depository services for Japanese Government Bonds (JGBs). The Bank of Japan Act stipulates that the BOJ must be at least 55% owned by the Government of Japan. The remaining 45% is held by non-government entities. As a central bank, the BOJ is effectively self-regulating, although it is also under the supervision of the Ministry of Finance.
The BOJ's role in the securities markets is primarily as issuer of JGBs and provider of book-entry settlement and custody services through the Bank of Japan Financial Network Systems (BOJ-NET).
Regulatory structure
- Financial Services Agency (FSA - www.fsa.go.jp)
The FSA ensures regulatory compliance in the securities industry and is responsible for all aspects of financial regulation, from the design of financial systems to the inspection, supervision and surveillance of financial activities. The FSA is also responsible for all kinds of financial services, such as banking, securities business and insurance.
The stock exchanges are organised according to the Financial Instruments and Exchange Law and licensed by the FSA. The FSA also regulates JASDEC jointly with the Ministry of Justice and Ministry of Finance. - The Bank of Japan (BOJ)
The BOJ supervises banks and regulates the foreign exchange and money markets. It conducts foreign exchange and market operations in line with the prevailing monetary policy.
The BOJ and the FSA jointly conduct inspections of Japanese banks and local branches/offices of foreign banks. - The Japanese Bankers Association (JBA)
Established in 1999, the JBA is an industry organisation for banks in Japan that takes the lead in dealing with issues confronting the banking industry as a whole.