Japan increases push for Tokyo as finance centre

TOKYO, June 6 Fri Jun 6, 2008 7:37am EDT

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TOKYO, June 6 (Reuters) - Japan will relax barriers between banks and brokerages and allow firms to offer a broader range of financial products, as the world's second-largest economy continues its push to make Tokyo more competitve as a global financial centre.

Foreign investors and other critics have long warned that Japan risks becoming a financial backwater, as companies increasingly shift their Asian focus to smaller but more flexible centres such as Hong Kong and Singapore.

Japan has been fighting to change its image as a closed shop. Financial Services Minister Yoshimi Watanabe has said his top priority is to make the country more attractive to foreign investors.

Under a bill passed by Japan's parliament on Friday, restrictions between banks, brokerages and insurance firms will be relaxed, allowing employees of large firms to simultaneously hold positions in different divisions.

It will also become easier for financial firms to share information across divisions, making it possible for the securities arm of a company, for example, to market products to clients of another division.

Under previous regulation financial firms in Japan were prevented from offering the "one-stop" financial solutions available in other countries.

"It's a good step forward towards maintaining Tokyo's position as the financial centre for the region," said David Hatt, president and chief executive officer of Deutsche Securities in Toyko.

"The big picture is that it will enable greater efficiency for us in the carrying out of the operations of our banking businesses," Hatt said.

But Japan is not without its hurdles. Tax law, for instance, is less accommodating than other Asian locations, and the world's No.2 economy continues to see sluggish growth.

Foreign managers are also quick to point out that English-speaking employees are scarce, as are those with backgrounds in financial law and financial engineering

In order to increase market transparency, the law will also stiffen penalties for insider trading and false disclosure, the regulatory Financial Services Agency said.

Banks and insurance firms will be able to engage in the investment advisory business, which was previously banned, and emissions trading.

The law will also allow for the creation of a market for professional investors, which will require less disclosure, and allow for exchange-traded funds based on commodities.

The passage of the bill sends a message that strengthening the financial markets is one of Japan's most important issues, Watanabe, the financial services minister, said in a statement.

"This country is open to the world," he said. (Reporting by David Dolan and Nathan Layne; Editing by David Cowell)

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