Japan's commitment to deregulation and market liberalization may be put to the test as the government and the business community respond to the misconduct of Nomura Securities Co. and other scandal-tainted firms, observers say.

Both have in the past been slow to punish scandal-tainted companies but must now take an uncompromising stance against Nomura if their pledges to create a fair, competitive market are to be believed, they said. The Nomura case, in which transaction profits are suspected of having been illegally channeled to a firm with links to a corporate racketeer, could not have come at a worse time for the government's efforts to push ahead with a "Big Bang" of financial system reforms, they pointed out.

Ju-ichi Yamanaka, senior institutional economist at NLI Research Institute, said the incident went against all the basic principles envisioned by the Big Bang, which advocates a free, fair and global Tokyo market. "The problem is that the accountability of Japanese securities firms remains unclear and that the idea that 'anything goes' is still strong," he said.