TOKYO ⸺ Tokyo Stock Exchange said on Friday that about 30% of the stocks listed on its main section do not meet new criteria which are planned to take effect on the rebranded “prime market” in April.
The TSE is planning the biggest reorganization of Japan’s stock markets in years with tighter listing criteria to make companies strengthen their governance and boost profitability.
Companies that fail can apply to remain on Japan’s first section, which is being renamed “prime market”, for an unspecified transition period by submitting improvement plans by December, before the TSE makes a final decision in January.
“Many companies will be able to stay thanks to the transition period. But the prime market has higher disclosure standards, which means higher costs, so clinging to the prime market could have more demerits for some companies,” said Shingo Ide, chief equity strategist at NLI Research Institute.
The new guideline requires “prime market” companies to have a free-floating market capitalisation of more than 10 billion yen ($90 million), and a free float of at least 35%.
They will also need to adopt a more stringent governance code in areas such as disclosure and board diversity.
The TSE did not name the companies, but analysts said they are likely to be mostly so-called small caps firms with limited liquidity that would represent less than 10% of the total market capitalisation.
The TSE’s Topix index, which includes all of almost 2,200 companies listed on the main board, will also exclude shares that have a tradable market capitalization of less than 10 billion yen by 2025.
Reporting by Hideyuki Sano and Makiko Yamazaki; Editing by Ritsuko Ando and Alexander Smith; Reuters