TOKYO -- Japan's parliament enacted today the legislative keystone of the broadest reshaping this country's financial markets have seen since their re-establishment after World War II.
The new law effectively tears out the "fire wall" that separates the banking and stock brokerage businesses, allowing the two to operateon each other's turf much as they are increasingly permitted to do in Europe and the United States.
Final approval of the law in the upper house of the Diet, Japan's parliament, was virtually without debate, a sharp contrast to the pulling and hauling among deeply entrenched interests that accompanied its framing. The bill had already cleared the lower house and the industry reorganization is to begin in January.
Enactment came at a time when Japan's financial markets are reeling from scandals and the country's economic slowdown. TheTokyo Stock Exchange has suffered two weeks of relentless new plunges that brought its most-quoted index, the Nikkei 225, to a 5 1/2 -year low at last night's close. Its value stood at just over 40 percent of its December 1989 peak.
Today's bill, the product of more than three years of study, is not specifically aimed at helping the markets find their bearings.
Foreign bankers and brokers, as well as many Japanese, have roundly criticized this country's financial markets for half a decade. They say the system is too closed and lags far behind the "economic miracle" that has made postwar Japan the world's No. 2 economy.
"We are a financial superpower if you only look at the numbers -- reserves, assets and transactions," said Shujiro Ogata, a former deputy governor of the Bank of Japan. Foreign bankers and brokers here, who have long chafed under rules that restrict their operations, would get little relief from the current bill. But most say they welcome it as a step that would bring broader liberalization closer.
Further financial reorganization is on the way. A study committee recommended this week that insurance companies be allowed to open stock-brokerage and investment-banking subsidiaries.
Tokyo is the world's third-largest financial market, after New York and London. For about 20 months in 1989 and 1990, the Tokyo Stock Exchange was the world's biggest in capital value, but it handed that distinction back to New York after the "bubble economy" burst in 1990.
Japan's Ministry of Finance keeps a lock on financial markets here, combining functions that are shared in the United States by the Federal Reserve, the Securities and Exchange Commission, the Treasury and several other agencies.
Ministry officials have moved cautiously and sometimes grudgingly in response to Japanese and foreign demands for reform.