TSE proposes to end grace period for firms in top prime section

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TSE proposes to end grace period for firms in top prime section

The Tokyo Stock Exchange monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar can be seen at the Tokyo Stock Exchange in Tokyo.

TOKYO Reuters - The Tokyo Stock Exchange said on Wednesday it had proposed ending a grace period in March 2025 for companies listed in the top prime section that fall short of listing rules, addressing criticism that its reform has been too lax.

In April of last year, the TSE adopted tougher listing criteria for its top category, but companies that fall short of the new rules can still submit improvement plans, a provision some investors say waters down the reform.

269 firms on the prime section failed to meet the criteria, according to the TSE, owned by Japan Exchange Group Inc.

The TSE proposed at a panel that those who have not met the rules by March 2025 would be given a one-year improvement period and then be designated as shares under supervision for six months before delisting.

The TSE recommends that the grace period for listing rules end in March 2025, as well as the standard and growth sections of the TSE.

The prime section, rebranded from the TSE's first section to attract more foreign investors, is supposed to have companies with strong profitability that meet global standards.

The TSE said that about half of the 1,800 companies in the prime section are trading below their book value.

The TSE said it was going to urge companies with underperforming stocks to discuss and disclose measures to improve capital efficiency.

The bourse plans to assess board effectiveness at companies, specifically on the functions and activities of their nomination and compensation committees, for better governance, it said.