Tokyo Bourse Chief Optimistic on Extending Five-Hour Trading Day

(Bloomberg) -- The head of the Tokyo Stock Exchange sees a “realistic” opportunity that trading hours will be extended, as the bourse deepens discussions over the merits of a longer cash-equity trading day.

Hiromi Yamaji, the president of the exchange, told Bloomberg TV in an interview on Monday that it looks more feasible to extend hours than the last time the issue was debated in 2014. Then, a mooted evening session was shelved amid opposition from brokerages.

“I feel that the trading hour extension looks more realistic than the last time we discussed,” Yamaji said in the interview. The Tokyo Stock Exchange has formed a working group to debate if trading hours can be lengthened past the current 3 p.m. close, which would be the first extension in more than a decade.

Tokyo has one of the shortest trading days of major world exchanges, with a total of just five hours available. Yamaji said a variety of opinions have been raised by the members of the group, including the impact on post-market processes, and cautioned he didn't know how long any extension would be.

Formerly the head of the Osaka Exchange, Yamaji is a veteran of Nomura Holdings Inc., and took over as head of the Tokyo Stock Exchange in April, after an unprecedented all-day trading outage in October cost his predecessor his job.

Here are the other key comments from the interview with Yamaji:

Overseas Appeal

Tokyo has struggled to attract major foreign listings over the years, but Yamaji said firms should consider the appeal of Japan's “fair and open” markets.

“Japan has a very stable democratic government, and our regulation is also very stable,” he said, hailing the high liquidity available in Tokyo. “You don't have any other markets like this in Asia.”

Japan has been pitching its capital markets in an attempt to lure operations to Tokyo from Hong Kong, sensing that Beijing's tightening grip on the city may be an opportunity to build the Japanese capital's reputation as an international financial hub.

Yamaji said Tokyo's IPO market had been strong in the last few years, with multiple Asian firms from outside Japan going public this year, including Taiwan-based Appier Group Inc. and Omni-Plus System Ltd., a Singapore-based supply chain management company.

Toshiba Report

An explosive report that found Toshiba Corp. sought help from the Japanese government to influence a key shareholder vote has again spurred criticism over corporate governance in the country. Yamaji said the exchange was closely watching the impact of the issue on foreign investors' perception of Japanese markets.

“We have been watching the Toshiba situation carefully especially since the independent report came out,” Yamaji said. “If this Toshiba issue has a negative impact over the flow of investment by overseas investors, that's not good for the Japanese capital markets.”

Market Reform

The Tokyo Stock Exchange is slated to hold a dramatic market shakeup next year, with the current First Section to be replaced by a trimmer “Prime” segment of blue-chips, in addition to a start-up market and a grouping for companies that fall in between. Some market watchers have voiced concern that the reform could be a missed opportunity, but Yamaji said the reform was a beginning, rather than an end.

“It's very important to remember that this market reorganization is not the final one,” Yamaji said. “It's just a first step to transform the TSE.”

The current market structure is a legacy of the 2013 merger between the Tokyo Stock Exchange and the Osaka Securities Exchange, Yamaji said, which left it with such oddities as having two separate markets for growth stocks. By switching to three market segments with clearly defined concepts, the bourse aims to build a “market of choice for domestic and overseas investors,” he said.

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