The Tokyo Stock Exchange acquired a new legal status as a corporation, effective Thursday, shedding its 52 years' standing as a nonprofit organization. This welcome step follows the global trend of incorporation of stock exchanges. The new TSE has the blessing of those concerned, including market players, who hope that it will become a strong rival to the markets of New York and London.
The chief challenge is to build a profitable organization with a solid business foundation. A sound stock market can exist only under a sound stock exchange. For that, the TSE needs to return to basics: Stocks should be priced and traded according to fair and transparent rules; otherwise, the Tokyo market will lose the trust and confidence of investors here and abroad.
What happens in Kabutocho, the Japanese equivalent of Wall Street, is a global concern. For one thing, Tokyo is a bellwether market in Asia because it is the first of the world's major stock markets to open, before London and New York. During the boom years of the 1980s, however, the TSE earned an unsavory reputation among foreign investors as being "opaque and unfair." The Tokyo market was effectively rigged, they complained, with the "Big Four" brokerages maintaining intimate ties to domestic institutional investors. During the 1990s the market went downhill as Japan's economy hit the skids.