JIN-174 -- US Chiding on Short-Selling Rules Embarrasses

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News
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Issue No. 174
Wednesday, March 27, 2002
Tokyo

CONTENTS

++ Viewpoint: US Chiding on Short-Selling Rules Embarrasses
Authorities
++ Noteworthy News
- Robot Pets to the Rescue
- Foreign Profs May be Allowed as National University Principals
- Tokyo District Court Rules Ishinara's Bank Tax Invalid
++ Events

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++ VIEWPOINT: US Chiding on Short-Selling Rules Embarrasses
Authorities

The minister for financial services, Hakuo Yanagisawa, held his
tongue last week when he heard R. Glenn Hubbard, chairman of the US
Council of Economic Advisers (CEA), had complained to the media about
the Japanese crackdown on short selling of equities. This year, the
authorities have been punishing violations of short-selling rules with
renewed vigor. Big name brokerages such as Morgan Stanley Japan and
Goldman Sachs have had parts of their trading suspended for
short-selling violations, while a new set of rules on short-selling
was introduced in February. The Japanese equity market in general has
welcomed the tougher stance: It is considered to be one of the main
reasons why Japanese share prices have been on the rise over the past
few weeks.

Short-sellers sell a security they don't own in the hope of buying it
back at a lower price. Although short-selling is legal as long as
securities firms comply with certain rules, the practice is often seen
as causing downward pressure on equity prices. Yanagisawa had been
proud that Japan had finally caught up with the US standard in terms
of regulations until Hubbard dampened his enthusiasm.

Hubbard, who visited Japan earlier this month, reportedly argued that
tighter rules and stricter surveillance are measures to crack down on
trading violations or to keep equity markets clean, but using trading
regulations to boost share prices isn't appropriate. In other words,
the short-selling rules shouldn't be used as a way to keep the
economy afloat while ignoring other fundamental problems. Many
analysts have felt that the new pressure to comply with short-selling
rules just as the fiscal year winds to an end was meant to drive up
stock indexes as much as possible.

According to the Japanese press, Yanagisawa kept his mouth shut when
he met Hubbard, but commented later that "we have done nothing that
could be criticized," adding that "I just wished for a fair judgment."

The issue of short-selling has become even more complicated because
it is not clear what constitutes fair punishment. Currently, equity
brokerages that are suspended from trading equities are also banned
from participating in bond auctions. This also causes problem for the
Japanese government, which has massive bonds that need to be sold. If
the government keeps suspending brokerages from participating in bond
auctions because of violations, the government may not be able to sell
as many bonds as it wants to. The latest news in the Japanese media is
that the Finance Ministry is considering letting violators trade bonds
after all. Whether or not the ministry goes ahead with its plan is yet
to be seen, but the issue has at least opened a debate on how to best
regulate the Japanese equity markets.

-- Sumie Kawakami

Sources:
"Amid Market Woes, Financial Authorities Get Tough" from JIN 169
http://www.japaninc.com/newsletters/index.html?list=jin&issue=169

From the Asahi Shimbun Newspaper (in Japanese)
http://www.asahi.com/business/update/0325/001.html

Comment by Hakuo Yanagisawa, from Nikkei Shimbun Newspaper (in
Japanese)
http://www3.nikkei.co.jp/kensaku/kekka.cfm?id=2002032005535

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy to your browser.)

** Robot Pets to the Rescue

Extract: Omron and Tmsuk of Kyushu unveiled a home security system
yesterday that uses a robotic stegosaurus to roam through the home
and make sure everything is safe. Tmsuk is also involved in a similar
project with Sanyo Electric, making robotic watchdogs that bark at
intruders.

The watchful dinosaur and dog are loaded with sensors, have their
mouths wired with 3G technology and can respond to simple commands.
They roam around the house, and if they find something amiss -- a
door unlocked, a window left open, for example -- they contact a
security center. The stegosaurus actually lets out a mechanized roar
and sends a message to Omron's M2M (machine-to-machine) Center. The
center then sends a warning email to the homeowner's cellphone. Users
can even call the stegosaurus (there's also a triceratops model) and
give it simple voice commands.

Or at least that's how the system, due out within a year, is supposed
to work. But the technology is still a little rough around the edges.
At a recent demonstration in Tokyo, the triceratops lurched around
awkwardly and the stegosaurus had to be lifted onto the stage and
tinkered with most of the time, leading Tmsuk president Yoichi
Takamoto to apologize several times to a roomful of reporters.

-- Bruce Rutledge

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** Foreign Profs May be Allowed as National University Principals

Extract: Japan boasts that it is reforming public universities but,
yet still denies non-Japanese academics the opportunity to take
charge. That may be about to change: As part of a plan to make
national universities independent administrative corporations, an
advisory panel to the Ministry of Education, Science, Sports and
Culture this week submitted a report asking to make national
university employees 'non-public servants.' This would pave a way for
foreign professors to become principals. It would also allow a
national university principal to take a job in the private sector, so
that a company executive could also qualify for the position.

Japanese national universities are currently under the direct
supervision of the ministry, but the government is trying to
decentralize the system so each university would take a more active
role in administrating itself. If approved by the Diet, the plan will
be implemented by fiscal year 2004.

Sources:
"National Universities to Become Independent Administrative Bodies"
Asahi Shimbun (in Japanese)
http://www.asahi.com/national/update/0326/024.html

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** Tokyo District Court Rules Ishihara's Bank Tax Invalid

The Tokyo District Court on Tuesday ruled that a controversial local
tax on banks that Tokyo Governor Shintaro Ishihara implemented last
year was invalid. Ishihara announced his plan to introduce the bank
tax two years ago when the central government attempted to bail out
several major banks by injecting taxpayers' money. The objective was
to tax banks on such measurements as market capitalization, revenues
and number of employees, instead of profits. Up to then, the Tokyo
government was unable to tax unprofitable banks. The Tokyo District
Court ordered the Metropolitan government to return 72.5 billion yen
that 18 commercial banks had paid in special local tax in fiscal
2001.

Source:
"Tax Bureau Disappointed by Bank Ruling" Yomiuri Shimbun
http://www.yomiuri.co.jp/index-e.htm

"Tokyo Loses Battle to Levy Own Taxes" Mainichi Daily News
http://mdn.mainichi.co.jp/news/20020326p2a00m0fp028000c.html

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+ No events this week
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STAFF
Written by Bruce Rutledge (bruce@japaninc.com) and Sumie Kawakami
(sumie@japaninc.com)
Edited by J Mark Lytle (mark@japaninc.com)

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