Some observers are urging that the Topix index, which is based on the value of all shares listed on the TSE, be used as the bellwether indicator. Of even greater concern is the fact that the compositional change made the TSE more vulnerable to the vagaries of high technology stocks. Government and TSE officials have put on a brave face, arguing that the Nikkei 225's slide does not reflect the economy's improving fundamentals. Besides all the new options for making money, individual investors are saving money as a result of lower brokerage and trading fees. Nonetheless, Japan's securities industry reported strong profits for FY 1999 and released an upbeat forecast for the current fiscal year.
Recent events highlight the fairly rapid evolution of Japan's capital markets.
Without question, though, a regulatory framework that is far out of step with current needs hampers an ongoing transformation. The Commercial Code has been identified in particular as the source of key obstacles. Analysts say that these conditions prevent small companies and start-ups that cannot meet the minimums from tapping capital markets. Documents supporting an IPO also must be submitted in Japanese, a demand that foreign firms say makes listing in Japan relatively less attractive. Current rules also have more subtle effects.