Japanese law stipulates that stock exchanges establish their own rules for listing securities. The links below are for the listing procedure of the Tokyo Stock Exchange (TSE) for Japanese Government Bonds (JGBs) and non-JGBs.
Financial institutions, securities companies, and banks must register with the Financial Services Agency (FSA).
Recent amendments to the Law on Securitization of Specified Assets by Special Purpose Companies allow for a change to the procedures for establishing a special purpose company for the securitization of assets. Once implemented, the procedures will be simplified from the current registration system to a notification system with the Ministry of Trade and Industry (MITI) and the Ministry of Finance (MOF). An unofficial and provisional MOF translation of the amendment’s outline is provided at the website linked below.
The Business Accounting Council establishes accounting and auditing standards in Japan. It publishes the Accounting Standards for Financial Instruments (ASFI), which provides standards for mark-to-market accounting and market price valuation of securities. The ASFI requires debt securities holdings to be classified by purpose of holding, with each classification using a specified valuation method. Securities that are held-for-trading are securities for the purpose of gaining profit through fluctuation of market value, and are recorded in the balance sheet at current market values. Profit-and-loss are recorded in income statements. Held-to-maturity securities are redeemed at face value and are presented on balance sheets at acquisition cost. The compulsory devaluation method applies to this type of holding when the market price has fallen significantly. Other securities holdings include those held for lengthy periods for business purposes that do not fall under the categories above. These securities are valued and presented on balance sheets at current market prices. Profit and loss are presented under shareholders' equity on balance sheets under ''balance of revaluation of other securities holdings.''
Mutual funds must submit an official report to the Financial Services Agency (FSA), using mark-to-market practices, and furnish fund investors with the report. The reporting frequency and timing are based on characteristics of the fund such as maturity and currency, among other factors. Valuation is based on market prices either from an exchange or the over-the-counter (OTC) market. Details of the regulation can be obtained through the Investment Trust Association. However, no English translation is currently available.
Capital Adequacy Regulations
As members of G10 markets, banks in Japan must satisfy risk-based capital requirements that involve mark-to-market practices to measure market risk. A revised rule for the new capital adequacy framework following Basel II standards took effect at the end of the 2006 fiscal year. Details of the changes are outlined at the website linked below.
Japan treats income tax on individuals and corporations separately, following the Income Tax Law and Corporate Tax Law, respectively.
A matrix of the taxation for different types of bonds is provided below.