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Expectations for the TSE market restructuring towards realizing the affluent society

2022.01.11

Shuichi Matsuda

Shuichi Matsuda

Professor emeritus of Waseda University, President of the Stock Research Center

Shuichi Matsuda

Shuichi Matsuda

Professor emeritus of Waseda University, President of the Stock Research Center

The first major reform since the establishment of the Japan Exchange Group in 2013 is the market restructuring of the Tokyo Stock Exchange, which starts in April 2022. It involves the reorganization of market divisions, which used to be the mixture of wheat and chaff, in a manner to clarify the concept and respond to rapid changes in the economic and social environment, and thus improves the system of the cash market to realize the affluent society that is supported by diverse investors in Japan and abroad.

In order to help Japanese companies make up for delays of their responses to drastic changes in the economic environment, and support listed companies in increasing their corporate value, I consider there are three objectives as follows:

・ Eliminating the ambiguity in the existing four market divisions, and establishing a market which is conducive to diverse investors for making investment decisions

・ Supporting a shift of the industrial structure that responds to changes in corporate and individual activities due to the Fourth Industrial Revolution

・ Revising the criteria for listed companies, which utilize various kinds of capital, concerning their smooth dialogue with investors

The new market segments are reorganized into the Prime Market, Standard Market, and Growth Market. To support sustainable growth of companies listed on the market segments they select, as well as an increase in their corporate value over the mid- to long-term, the Corporate Governance Code was revised, and it clarified which principles are applied to which market segments. That has an impact on setting long-term goals for corporate activities.

There is a view that, in the securities market on the premise of free economic activities, wealth is concentrated in entrepreneurs, and it leads to a wealth gap among citizens and thus divides the nation. However, without sustainable growth of the economy, it is difficult to raise the level of wealth distribution. The securities market has a “function to distribute wealth”, being a venue where people directly acquire shares of listed companies, or make indirect investments through investment trust funds or pension funds.

The following summarizes expectations for companies listed on each market segment they selected:

・ Prime Market: companies that accelerate the reorganization of the vertical structure of an industry, and have an impact on the growth of the global economy

・ Standard Market: medium-sized leading niche companies that increase their corporate value and presence

・ Growth Market: companies that are conscious of their speed of growth, have high aspirations, and place significance on intellectual properties and brand(s)

To pass the Earth on to future generations as a comfortable place to live in, utmost importance is placed on zero emissions by 2050. All new challengers and corporations are moving toward that direction. I hope listed companies, having selected a market segment in response to the market restructuring, will raise necessary funds in Japan and abroad, for making the best use of their management resources, so they can pass the companies on to the next generation as prominent growth companies.

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