After moves to sex-up Japanese government bonds and make debt-reduction a priority of his economic agenda, Japan’s new prime minister Naoto Kan is clearly out to show he means business.
On Friday, his government unveiled a proposal to merge the country’s main stock exchanges by 2013, in a push to attract more funds to Japanese bourses and boost their regional competitiveness.
As the FT reports, the idea is contained in the government’s revamped “medium term growth strategy,” a souped-up, 113-page version of the plan conceived by the previous Hatoyama administration and approved by the cabinet on Friday.
It follows the launch on Thursday of the ruling Democratic Party’s mid-term election manifesto, a lofty document that pledges to raise sales taxes to further boost Japan’s finances, lift the country from the deflation mire and double its long-term real growth rate to 2 per cent by 2020.
But back to the proposed stock exchange merger.
By integrating the four key bourses — Tokyo Stock Exchange, the Osaka Securities Exchange, the Tokyo Financial Exchange and the Tokyo Commodities Exchange — the government says it will create a “new financial nation” that will “rejuvenate and develop” the markets’ capabilities and make Japan an Asian financial centre that “draws in funds from the globe” and “opens up the country”.
But like so much in Japan, the idea sounds better in theory than in practice.
As the FT explains:
It is unclear exactly how such an integrated exchange would operate but Osamu Sakashita, a spokesman for the prime minister’s office, said practical benefits could include better English-language information disclosure and extended trading hours…
… Merging the exchanges, which all have different ownership structures, would be not be easy. The government holds no stake in any of the four involved in the proposal. Market participants say that there has been talk for years of combining the Tokyo stock and commodity exchanges in some form.
One obstacle has been to develop a way for three different bodies – the Financial Services Agency, the trade ministry and the agriculture ministry – to oversee one exchange.
It all sounds rather ambitious for the government’s hoped-for deadline of 2013. As many critics have noted — every time any Japanese government (and there are many) pledges to transform the country into a financial centre — there are some very daunting obstacles.
The toughest of them all, and one that no government is likely to be able to reform radically, is Japan’s highly uncompetitive tax and regulatory regimes. They are no match for the more appealing environments of Singapore and Hong Kong, where many financial institutions — even those specialising in Japanese securities — choose to base themselves.
For now, it would seem, Japan’s shiny “new financial nation” will continue to lack polish.
Related links:
Japan’s inflation target dies a very early death - FT Alphaville
Japan’s growth plan aims to cut company tax – Bloomberg
Kan’s Kiheitai-Japan’s cavalry – Council on Foreign Relations
Japan articles - FT.com