Business leaders mixed on treasury stock

Asian Economic News, Jan 22, 2001

TOKYO, Jan. 18 Kyodo

Japanese business leaders expressed mixed views Thursday about a proposed removal of a legal curb on the use of treasury stock to prevent share prices from falling further.

Kosaku Inaba, head of the Japan Chamber of Commerce and Industry, disagreed with the proposed measure, and expressed concern the possible use of treasury stock may encourage insider trading.

''As share prices reflect credibility toward the Japanese economy, it should be the stock market that sets them,'' Inaba told a press conference.

He stressed the necessity of maintaining transparency in stock transactions.

Meanwhile, Nippon Steel Corp. President Akira Chihaya welcomed the proposed measures, saying it will be possible to incorporate treasury stock into stock options and pension funds.

Treasury stock refers to issued shares that have been reacquired by the issuer. Although Japan's Commercial Code allows firms to buy back shares for such purposes as retiring them, it bans the use of treasury stock to jack up share prices.

A ruling Liberal Democratic Party panel tasked to map out measures to prevent a further fall in share prices agreed earlier in the day to contemplate treasury stock.

While Melco Inc. President Makoto Maki said, ''It would be better if the government refrained from interrupting the market,'' Kirin Brewery Co. President Yasuhiro Sato said, ''The proposed measures will be effective in the short-term, but it is more important to craft drastic measures to boost the overall economy.''

On Thursday, Tokyo stocks rose for a fifth straight trading day, reflecting market expectations for the government's stock price supporting measures.

But fears remain that share prices will turn downward soon as companies unload their cross-held shares toward the end of the current fiscal year on March 31.