Japan to restrict stock short selling

TOKYO, Oct. 28 (UPI) -- Japan, concerned about the steep stock market plunges, moved up to Tuesday a plan to ban the short selling of shares beginning in November to calm the markets.

Financial Services Minister Shoichi Nakagawa said the restriction will apply to "naked short selling," which was previously scheduled to go into effect Nov. 4, Kyodo news service reported.

The 225-stock Nikkei index has sunk to a 26-year low, a development that is partly blamed on speculative short selling.

Short selling involves selling borrowed shares on the assumption their prices would fall, thereby allowing the sellers to repurchase them at lower cost, return them to the lender and pocket the difference in the price. Naked short selling involves transactions in which traders sell stocks without borrowing them first, thereby increasing market volatility.

Nakagawa told reporters the ban date was being moved up on the orders of Prime Minister Taro Aso.

He said the Financial Services Agency will work with the Securities and Exchange Surveillance Commission and the Tokyo Stock Exchange to look into any past violations of short selling regulations.

Saying the United States and Europe have introduced similar steps against short-selling, Nakagawa said, "We decided (to move up the short selling ban) as we thought it could be dangerous for the Tokyo stock market if we do not take action immediately."