A frequent criticism of Japan's financial market regulation
is that it focuses strongly on formalistic compliance with
existing regulations – a so-called gotcha mentality.
The country is also accused of neglecting structural reforms,
and avoiding dialogue with market participants that might
contribute to smoother-functioning and more liquid markets.
From the perspective of a financial services provider
undergoing a periodic inspection, or struggling to meet the
strict investor protection requirements recently introduced by
the Financial Instruments and Exchange Law, this charge still
might seem valid. However, the past two to three years have
seen modernisations that give greater certainty, and in many
cases new flexibility, to laws and regulations affecting a
broad range of corporate transactions.
To take one example, Japan's new Company Law, most of which
took effect in May 2006, permits...