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Tokyo Stock Exchange to restructure markets, introduce 'Premium' section

This Dec. 24, 2014 file photo shows the Japan Exchange Group Inc. building in Tokyo's Chuo Ward, home to the Tokyo Stock Exchange. (Mainichi)

TOKYO -- The Tokyo Stock Exchange (TSE) has solidified plans to institute stricter standards on listings and demotions in its First Section, and rename it the "Premium" market comprising Japan's leading companies, it has been learned.

Of the three sections for mid-size and up-and-coming firms, the TSE's Second Section and JASDAQ will be merged into a "Standard" section for general listed companies.

The Roundtable on Listing System Improvement, headed by Hideki Kanda, a professor at Gakushuin University Law School, will incorporate the reforms in a report to be compiled in the near future. The TSE is set to announce the plans before the end of March. Market capitalization criteria, which will serve as a guideline for listings and demotions, along with transition procedures will be developed in detail later.

The TSE currently operates four sections: the First Section, the Second Section, JASDAQ, and Mothers. The plan is to restructure these into three sections: Premium, Standard, and a third market that would take over Mothers' role of targeting up-and-coming companies.

In 2012, four years after the collapse of Lehman Brothers triggered a worldwide financial crisis, criteria for companies to be listed directly in the First Section was reduced from an estimated market cap of 50 billion yen or more, to 25 billion yen or more. There is also a low bar for internal promotion from the Second Section or Mothers to the First Section, at 4 billion yen or more. This has led to the First Section being a jumble of small and giant corporations, blurring its status as a top-ranked market.

The roundtable will recommend in its report that the market cap bar for being listed in the Tokyo bourse's top section be raised, and made the same both for firms being promoted and for those listed directly. The panel will also propose that the number of top-listed companies effectively be reduced by making the market cap redline for demotion, currently set at 2 billion yen, stricter.

(Japanese original by Naoko Furuyashiki, Business News Department)

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