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Japan Targets Stock Manipulators

January 6, 1998

TOKYO (AP) _ Japan plans to tighten measures against price manipulation and rumor mongering that could further hurt confidence in the country’s slumping stock market, Finance Minister Hiroshi Mitsuzuka said Tuesday.

The steps would include confiscating profits from manipulative trading, increasing fines against brokerages breaking trading rules, and a closer monitoring of volatile stocks, Mitsuzuka said.

Mitsuzuka also said he would consider strengthening rules on short selling, which he said could be used to manipulate stock prices and aggravate price drops.

Selling short involves betting with borrowed shares that their prices will go down. The short seller makes a profit by repaying the borrowed shares at their new, lower price.

Mitsuzuka urged the Tokyo Stock Exchange to work closely with the watchdog Securities Exchange and Surveillance Commission to catch violators. He he expects regulators to ``deal severely″ with them.

A series of failures in the financial industry, resulting from a mountain of bad debt, and worries about business prospects both in Japan and neighboring nations have led to the slump in the Tokyo market.

Mitsuzuka said a more transparent and fair stock market is needed to help curb sharp swings in the share prices.

``Since November of last year, prices of certain stocks have moved sharply on the back of various information, causing the overall stock market to move sharply as well,″ he said.

Meanwhile, starting Wednesday, the Tokyo Stock Exchange plans to begin monitoring a larger number of stocks for possible manipulation and will take faster action curb improper trading.

``To say it simply, we will tighten the net,″ Mitsuhide Yamaguchi, chairman of the Tokyo Stock Exchange said.

Jesper Koll, chief economist at J.P. Morgan Securities Asia, said the measures will mean stock prices will be determined more by fundamentals and less by rumor.

``It will increase the checks and balances,″ he said.

But Jason James, a strategist at HSBC James Capel, said, ``I don’t think there is any particular problem about the market mechanism. I think the market is merely mirroring investors’ concerns about the economy. For the market to pick up, you have to boost confidence in the economy.″

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