A former executive of defunct Yamaichi Securities Co. told the Diet in unsworn testimony Friday that in January 1992 the brokerage believed a senior Finance Ministry official had blessed Yamaichi’s plan to illegally buy back “tobashi” losses.

Tobashi is a practice in which brokerages shift investment losses from one client to another to prevent a favored client from having to report losses. Although tobashi is not illegal, a Jan. 1, 1992, legal revision made it unlawful for a brokerage to buy back losses caused by tobashi trading.

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