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LEAD: Japan switches to digital stock certificates to boost efficiency.

TOKYO, Jan. 5 Kyodo


Japan switched to a digital share system Monday, the first trading day of 2009, without major glitches as paper stock certificates of all exchange-listed companies converted into electronic data to boost time and cost efficiency as well as shareholder security.

Traditional printed certificates often stored for years at homes or in bank boxes became invalid as shareholder information on all stock certificates becomes centralized at a single entity called Japan Securities Depository Center Inc.

The transition to the paperless share system will allow companies to save time and costs in keeping track of shareholder records, eliminating the lengthy procedures of delivering and processing the paper stock certificates.

''There will be an economic impact of over 100 billion yen, just by not having to issue (paper) stock certificates,'' said Munetaka Saito, director of the corporate planning department at Japan Securities Depository Center, or JASDEC.

The computerized data will also lower the risk of stock certificates being stolen or lost, while making it easier and faster for shareholders to receive dividends.

''We hope to contribute to enhancing the functions of Japan's capital markets by providing services that have a high level of credibility, convenience and efficiency,'' Saito said.

As part of government measures, electronic data on all stock certificates will be transmitted via their owners' accounts at their brokerage firms to JASDEC, which is a joint stock company funded by Tokyo Stock Exchange Group Inc., the Japan Securities Dealers Association and major securities houses and banks.

According to JASDEC, about 95.1 percent of all outstanding shares are believed to have been converted into electronic data, while the remaining 4.9 percent, representing around 17.8 billion shares, are still believed to be kept in homes or elsewhere as printed certificates.

The Financial Services Agency and securities houses have been preparing to launch the new system since a relevant law was enacted in June 2004, and will continue to urge shareholders to turn their paper certificates into electronic data so they can continue to carry out their transactions smoothly.

The switch to a paperless share system will wrap up a government campaign to computerize stocks and other securities, which included the digitalization of bonds and commercial paper in 2003 followed by the transition of corporate bonds in 2006.

While no major disruptions occurred on the first day, Saito said the center will continue to watch out for system glitches in the future and warned against possible fraud that may arise in connection with the paper certificates.

Meanwhile, nonlisted companies can choose individually whether they want to convert paper certificates into electronic data or not.
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Publication:Japan Weekly Monitor
Date:Jan 5, 2009
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