Japanese Government Scolds Stock Exchange

Japanese government officials Thursday sharply criticized the Tokyo Stock Exchange for its inability to cope with a surge of stock sales triggered by an investigation of a popular Internet company’s financial dealings.

“A stock exchange that can’t carry on trading simply doesn’t deserve to exist,” Economy Minister Kaoru Yosano said in a nationally televised news conference. “The exchange should make it a top priority to bring business back to normal.”

Chief Cabinet Secretary Shinzo Abe, the top government spokesman, also urged the bourse to fix its problems promptly. “International credibility must be restored,” he said.

The government stepped up its attacks on the exchange even as the market stabilized after a three-day sell-off pulled the Nikkei-225 index down nearly 7%.

The Nikkei rebounded 2.3% on Thursday and was nearly flat, at 15,703, in late trading today.

Other Asian markets also calmed down after recent heavy selling. Markets were higher Thursday in South Korea, Hong Kong and Taiwan, among others.

A raid by prosecutors on the offices of Internet firm Livedoor Co. late Monday caused heavy selling in Net-related shares and many other Japanese stocks on Tuesday and Wednesday. The Tokyo exchange, fearing that its computer system would be overloaded, closed the market 20 minutes early on Wednesday.

The exchange also delayed the start of Thursday’s afternoon session by 30 minutes.

On Nov. 1 a computer glitch had caused the exchange to suspend trading most of the day.

The latest curtailed trading hours embarrassed exchange officials and the government, and exposed what analysts said was a failure over the years to bring the Japanese market’s infrastructure up to speed with other major international markets.

“Such a stop in trading is unprecedented in the world,” business daily Nihon Keizai Shimbun said in a commentary Thursday.

Tokyo Exchange President Taizo Nishimuro said the market was in the middle of updating its systems and asked that brokerages bundle orders as much as possible. “We deeply apologize for the great inconvenience,” he said in a statement.

Executed orders came close to the 4-million-trade capacity on Thursday. The exchange said it was working to boost its system capacity to as many as 5 million transactions by month’s end and to 8 million longer term.

The New York Stock Exchange routinely carries out more than 5 million trades a day.

As for Livedoor, the firm was expected today to present the exchange with the results of an internal probe of its finances.