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Finance Minister Hiroshi Mitsuzuka announced Tuesday a set of measures — including the introduction of more stringent restrictions regarding the short-selling of stocks — aimed at reducing volatility in Tokyo’s stock markets.Specifically, the definition of short-selling under the Securities and Exchange Law would be revised so it also covers the selling of borrowed stock, bringing Japan’s rules into line with those of the United States, Mitsuzuka explained.The law already stipulates that short-selling must be reported as such to the stock exchange and that these transactions cannot be made below market price. The plans outlined Tuesday also call for a new clause to be added to the Securities and Exchange Law that would require the confiscation of any profits made by shady means such as market manipulation.Both the new short-selling regulations and the confiscation clause would be incorporated into a bill to revise the Securities and Exchange Law, planned to be submitted to the upcoming regular Diet session, according to Atsushi Nagano, director general of the Securities Bureau.Mitsuzuka stressed the need to secure fairness and transparency in the stock market. He pointed out that since last November, the prices of certain issues have shown excessive movements based on various pieces of information, in effect causing great volatility in the market as a whole.”In order to create a fair and transparent market, proper action needs to be taken against market manipulation and other unfair practices which threaten the market’s pricing mechanisms,” he told a news conference, adding that he hopes such steps would restore confidence in the markets.The entire package would involve close coordination between the Finance Ministry, the Securities and Exchange Surveillance Commission, the Tokyo Stock Exchange and the Japan Securities Dealers Association.Mitsuzuka stressed that the steps do not run counter to the financial deregulation measures the government is touting as its “Big Bang,” saying it is necessary to formulate rules to create a transparent market if the core principles of “free, fair and global” deregulation are to be upheld. Under Mitsuzuka’s package, the TSE and the SESC would carry out an intensive screening of transactions and conduct hearings into brokerages regarding issues whose prices have moved excessively.The SESC, the nation’s securities watchdog, was also urged to step up efforts to counter illicit deals that threaten to warp market prices through such means as market manipulation and the spreading of groundless rumors. The securities industry was also urged to accelerate current plans to raise its self-imposed maximum penalty for illegal transactions from the present 100 million yen to about 500 million yen.Measures were also urged so that transactions done on the brokerages’ own accounts would be clearly separated from those they brokered for clients, enabling such information to be used to screen trades for illegal activity.

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