(1)

To expand the choice of means for investors and borrowers

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The complete lifting of the ban on securities derivatives

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Trading of options on individual stocks will be allowed at stock exchanges.

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It is planned that trading will commence at the Tokyo and Osaka Stock Exchange in July 1997.

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The ban on securities derivatives will be totally lifted, once the conditions are set for allowing over-the-counter trading of derivatives related to securities.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Banks will be authorized to engage in the business of over-the-counter trading of derivatives related to securities and commodities, although they will not be authorized to receive or deliver the underlying assets.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Introduction of the Asset Management Account.

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The Asset Management Accounts will be introduced.

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It is planned that this will be implemented during fiscal 1997.

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Authorization for banks to sell securities investment trusts and insurance

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Banks will be authorized to sell securities investment trusts certificates without going through subsidiaries.

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It is planned that the related bills will be submitted to the next ordinary session of the Diet.

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Banks will be authorized to lease their office space to investment trust management companies for direct sale of securities investment trusts certificates.

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It is planned that this will be implemented during fiscal 1997.

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Upon taking measures against abuse, banks will be authorized to sell long-term fire insurance and credit life insurance which are related to housing loans.

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It is planned that this will be implemented around the target year of 2001.

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Increasing the liquidity of assets by use of asset-backed securities (ABS), etc.

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As a conduit, a legal provision will be made for special purpose companies (SPCs), which are the issuing bodies of ABS.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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The liquidity of the money trust certificates will be improved by specifying the basis for issuing securities.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Liberalization of cross-border capital transactions

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The choice of investments and borrowing for companies and individuals will be expanded by liberalizing cross-border securities transactions and foreign deposits.

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The drastic revision of the Foreign Exchange Law has passed the Diet during the current session. The revised law will take effect on April 1, 1998.

(2)

To improve the quality of intermediaries' services, and to promote competition among them

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Utilization of holding companies

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Appropriate legal provisions will be made to allow the use of holding companies, and to take necessary measures to protect depositors, investors and insurance policyholders.

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In line with the implementation of revised Anti-Monopoly Law, necessary legal provisions will be made as quickly as possible.

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Review of the licensing regime for securities companies

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The present licensing system will in principle be replaced by the system of registration. Within this framework, the Approving system will be applied forspecific business areas for which special skills and a higher degree of risk control are required, such as OTC derivatives and the underwriting business.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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The business scope of separate subsidiaries

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The remaining restrictions on business scope of securities subsidiaries and trust subsidiaries will be lifted.

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The remaining restrictions will be lifted in the latter half of fiscal 1999.

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Measures will be taken to allow insurance companies and other types of financial institutions to enter each other's business areas by means of area-specific subsidiaries .
Measures will be taken at an earlier time to allow insurance companies to enter the banking, trust and securities businesses by subsidiary structure, and to allow securities companies to enter the insurance business by subsidiary structure.

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This will be realized at the latest by 2001.

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Abolishment of operational regulations to ordinary banks in the short-and long-term finance system

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Ordinary banks will be allowed to issue ordinary bonds.

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This will be implemented in the latter half of fiscal 1999.

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The Foreign Exchange Bank Law will be abolished.

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It is planned that related bills will be submitted to the next ordinary Diet session.

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Diversifying the business operations of securities companies

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The system of obligatory specialization will be abolished, allowing the firms to be diversified and differentiated in their business.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Liberalizing brokerage commissions for stock trading

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Brokerage commissions for stock trading will be fully liberalized.

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Liberalization will be completed by the end of 1999. As an intermediate step, the transaction value up to which the fixed commissions is applied to will be reduced from over one billion yen currently to 50 million yen in April 1998.

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Electronic money; electronic payment

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Necessary measures will be taken with respect to electronic money and electronic payment, by clarifying legal aspects, promoting new entries, and examining the protection of individual users.

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We will quickly discuss specific measures and take necessary actions.

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Diversifying the borrowing instruments of non-bank financial firms

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Legal restrictions on the issuing of bonds and commercial paper associated with the raising of funds for lending purposes will basically be abolished.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet, for those items requiring revisions of the existing laws.

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Reform of the rating organization system

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For fire insurance and automobile insurance,etc, the obligation for member insurers of a rating organization to use the premium rates calculated by the rating organization will be abolished.

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On condition that the Diet passes necessary revision of the relevant laws, this will be implemented by July 1998.

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Liberalization of the Foreign Exchange Business

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The authorized foreign exchange bank system, the money exchanger system and the designated securities firm system will be abolished. Restrictions of foreign exchange business will be lifted, and free entry and exit into and from foreign exchange business will be ensured. This liberalization of foreign exchange business will also enable providing various types of financial services according to customer needs, such as sale and purchase of foreign currencies and currency swaps.

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The fundamental amendment of the Foreign Exchange Law has passed the Diet during the current session. The revised law will take effect on April 1, 1998.

(3)

To develop a market with further utility

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Abolishment of the restriction of off-exchange trading for listed securities

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Upon establishing necessary rules, including the revision of the Securities and Exchange Law, which are designed to secure fairness of trading outside the exchanges, the restriction of off-exchange trading for listed securities will be securities.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Improvement of the liquidity of the OTC registered stocks

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The supplementary status of the regisrated OTC(JASDAQ) market relative to the exchanges, will be reassessed.Its function will be strengthened by taking measures to improve liquidity.

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These measures will be promoted after fiscal 1997.

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Lifting of the ban on the trading and intermidiating of unlisted or unregistered stocks by securities companies

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The ban on the trading and intermidiating of unlisted or unregistered stocks by securities companies will be lifted.

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This will be implemented in July 1997.

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Trading of financial futures

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For trading of financial futures, measures will be examined to develop new products, to establish trading techniques, and to enhance investor protection.

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Measures will be introduced during 1998 to allow spread transactions associated with short-term Japanese yen interest rate futures.

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Development of the short-term money market

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For the short-term money market, trading practices will be reassessed, and an attempt will be made to place BOJ-NET on a real time gross settlement(RTGS) basis.

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The system will be placed on a RTGS basis by the end of this century.

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Liberalization of cross-border capital transactions

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In principle, permission and prior notification requirements will be abolished for external settlements and capital transactions.

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The fundamental amendment of the Foreign Exchange Law has passed the Diet during the current session. The revised law will take effect on April 1, 1998.

(4)

To establish a reliable framework and rules for fair and transparent transactions

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Review of the system of consolidated financial statements

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There will be a shift to disclosures based primarily on consolidated accounting; there will be a fundamental review of consolidation procedures.

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Beginning in the March 1999 period, this will be implemented in stages.

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Establishment of accounting standards for financial instruments

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Accounting standards will be established, including the use of market-to-market method for such financial instruments as securities and derivatives.

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This will be implemented quickly based on the final report of the Business Accounting Council, which will be issued by the summer of 1998.

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Enhancement of audits by accountants

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The practice and system of auditing will be made comparable to the international norm, including review of the auditing procedures by other firms or accounting organization.

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This will be implemented quickly based on the recommendation of the Certified Public Accountants Examination Committee.

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Expansion of the definition of securities

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Along with the emergence of new products, the definition of securities will be expanded in order to apply more appropriately the investor protection measures, such as fair trading rules.

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It is planned that the legislative bill will be submitted to the next ordinary

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session of the Diet (part of this will be implemented by a cabinet order).

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Enhancement of rules in the Securities and Exchange Law

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Corresponding to the diversification of trading instruments, including the introduction of securities derivatives in the OTC market, there will be an enhancement of fair trading rules. Penalty provisions will be strengthened for insider trading.

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It is planned that the legislative bill about netting agreement will be submitted to the next ordinary session of the Diet.

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Enhancement of the system of inspection, surveillance and punishment

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Measures will be taken to enhance the system of inspection, supervision and punishment, including the strengthening of the function of the Securities and Exchange Surveillance Commission.

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This will be promoted after fiscal 1997.

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Establishment of the system of civil dispution settlements in securities transactions

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The system of Civil dispution settlements will be developed and enhanced by taking such measures as legalizing the system of mediation by self-regulating organizations, as stipulated in the Securities and Exchange Law.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Introduction of Prompt Corrective Action

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Prompt Corrective Action based on capital adequacy ratio will be introduced, whereby the authorities would take administrative action in a tramsparent and timely fashion.

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This will be introduced, starting in April 1998.

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Strengthening of measures to reduce settlement risk

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For the payment system, there will be an enhancement of the system of measures to reduce risks.

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The submission of the legislative bill is targeted for the next ordinary session of the Diet for agreement netting.

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Protection of users of financial institutions

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Necessary measures will be taken for the protection of consumer credit, upon consideration of such measures as the enactment of a unified consumer credit protection law.

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The payment system will be placed on an RTGS basis by the end of the century.

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Rules will be formulated to govern the explanation of non-depository products to consumers.

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The conclusion will be reached during fiscal 1997, after which necessary measures will be taken quickly.

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Strict enforcement of separate asset management; enhancement of the Securities Deposit Compensation Fund scheme

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The strict separation of client assets will be enforced. At the same time, the Securities Deposit Compensation Fund scheme will be treated as a juridical person under the Securities and Exchange Law; the system will be further developed and strengthened.

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This will be implemented during fiscal 1997.

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Response to international requirements such as economic sanctions and other emergency restrictions

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In view of the need for harmonization with international agreements, a mechanism that can effectively impose economic sanctions will be secured.

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It is planned that the legislative bill will be submitted to the next ordinary session of the Diet.

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Response to the International requests for the prevention of money laundering.

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Banks and money exchangers will be legally required to verify the identity for foreign remittance; the system to the customs authorities will be introduced in cases involving the export or import of means of payments such as cash.

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The fundamental amendment of the Foreign Exchange Law has passed the Diet during the current session The revised law will take effect on April 1, 1998.

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Development of an ex-post facto reporting system

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To ensure a proper understanding of markets trends and to prepare statistics on the balance of payments and external assets and liabilities, an efficient and effective ex-post facto reporting system will be introduced alleviating the burden of report.

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The fundamental amendment of the Foreign Exchange Law has passed the Diet during the current session The revised law will take effect on April 1, 1998.