Japan's financial watchdog unveiled a plan yesterday aimed at boosting weak stock prices and averting a financial crisis but shares dropped further and analysts dismissed the measures as cosmetic.
The six-point initiative by the Financial Services Agency (FSA) will ease rules on firms buying back their own shares starting March 24, and will ask industry groups as early as next week to set guidelines to limit short-selling.
Another three measures, including the boosting of central bank purchases of shares owned by banks, will be decided on Friday, said Kazuo Kitagawa, policy chief of the ruling coalition New Komeito party.
Despite the new rules, the Nikkei-225 index on Tokyo's stock exchange closed down 0.94 percent at 7,868.56 points yesterday.
The government has a track record of introducing measures to lift stock prices artificially in the lead up to the financial year-end on March 31 when most companies close their books and calculate losses on their stock portfolios.
Hiroaki Kuramochi, head of trading at Credit Lyonnais, described the measures as cosmetic, adding most investors were expecting more drastic measures. These could have included scrapping accounting rules which force firms to value their financial assets at market prices, he said.
"With so much noise and distraction, it was difficult for traders to sort the wheat from the chaff and the market basically ended up drifting," he said.
Under the FSA's plan, the maximum amount of their own shares companies can buy back would be quadrupled for three months from March 24, an FSA official said.
Asked whether the agency would extend the period if market fears continue, the official said: "We are hoping the anxiety in the market does not go on for too long."
The FSA plans to put pressure on institutional investors to justify their lending of stocks to short-sellers, who sell borrowed shares and buy them back later in the hope of making a profit as the price falls.
The scheme would also require improved risk management of brokers' stock trading on their own account and would ask financial institutions to take market conditions into account when selling shares.
"Every time I give Japanese policy makers the benefit of doubt, I end up losing money," said Chua Soon-hock, chief executive at Asia Genesis Asset Management Pte in Singapore, who declined to mention how much he manages in assets.
"Enough is enough."
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