NYSE Sets Up Panel to Give Japanese a Voice on Wall St.
New York Stock Exchange Chairman John J. Phelan Jr. announced here Wednesday that the exchange has established a Japan advisory committee to give Japanese businessmen a voice in decision making both on Wall Street and in Washington.
Phelan, addressing the Foreign Correspondents Club of Japan, said the new advisory group, identical to one set up three years ago with Europeans, will meet periodically with NYSE board members and join exchange officials in meetings with U.S. government officials.
The committee, he said, will be headed by former Foreign Minister Saburo Okita, with Sony Chairman Akio Morita serving as vice chairman.
Nine other leading businessmen, including Shoichi Saba, a Toshiba adviser who resigned as chairman of the giant electronics firm last year when one of its subsidiaries was discovered to have sold sensitive submarine-propeller machinery to the Soviet Union, will serve on the committee. No brokerage executives were included.
The Japanese advisory group, Phelan said, will “expose people in our corporate world and in our government” to more information about Japan and allow the Japanese advisers “to input to us directly and to our government and our corporations.”
Although Phelan said the NYSE has “never had any trouble discussing common problems with the Tokyo Stock Exchange,” there is no equivalent American advisory committee here.
Phelan said Japanese investors have developed “a kind of indifference” toward the New York market since last October’s “Black Monday” crash, but he predicted that they will return in growing numbers “in the intermediate and long term.”
Asked whether he fears that Japanese investors might export to Wall Street the practices of insider trading and stock manipulation that, in Tokyo, occur “as the norm, rather than the exception,” he said only that the NYSE has made great advances in its ability to detect such practices in the past three or four years.
“So I am not really so much concerned whether it comes from Japan or Europe or some other place. It’s easier today to identify those (malpractices). . . . If you can make progress with Switzerland, which we have, I think you can make progress with anywhere,” he said.
At the moment, he said, “Japan is trying to define the problem (of insider trading) narrowly. We define it broadly. Secondly, they don’t come from a history of surveiling that kind of thing.”
But he predicted that the NYSE, in the future, will “cooperate” with Tokyo in coping with insider trading and “harmonizing” regulations to prevent the abuse just as it is already doing by exchanging information daily with stock authorities in London.
Phelan also said he does not “understand” price-to-earnings ratios that average around 70:1 on the Tokyo Stock Exchange, compared to 15:1 in New York.
Warnings that “the bubble is about to burst” in Tokyo, precipitating a worldwide stock crash, however, probably would not come true “in the short term,” he said, but added quickly, “I don’t believe the laws of physics have been reversed.”
He cited Japan’s strong economic growth, the huge “amount of capital flowing into and being generated in this country,” what he called “under-investment” by both individuals and institutions in the Tokyo stock market and the “enormous amount” of infrastructure investment likely to be made in Japan as factors that support the high stock prices in Tokyo.
Stock Prices Slip
The Tokyo Stock Exchange is the only major market in the world that has more than regained the 21.1% loss it suffered during last October’s crash.
In trading Wednesday, the 225-share Nikkei stock index shed 120.28 to slip to 27,799.67. Although that is below the all-time peak set earlier this month, it is still 32.1% above its post-crash low of 21,036.76 set last Nov. 11.
Phelan praised Tokyo authorities for opening up Japan’s financial markets. Unlike the case three years ago, when he last visited Tokyo, the major topic for conversation this time was not the issue of access for American brokerages but “how you make money.”
