Tokyo stocks need to take centre stage

To wipe out superheroes, the villain of the Pixar movie “The Incredibles” had a fiendish plot: He would make them ubiquitous. “When everyone’s super,” the villain named Syndrome opined, “no one will be.”
The Tokyo Stock Exchange (TSE) has no such diabolical goals. Yet it’s at risk of making Japan stocks just as irrelevant with its much-hyped but disappointing market reorganisation, which created a new “Prime” segment to house Japan’s best companies — then opened the category to almost everyone.
The exchange ditched its confusing existing segments at the start of April and created three new sections for Japan’s nearly 4,000 listed companies, including the top-tier Prime segment. But Prime has launched with 1,836 members. Some of its members include Brass Corp, a wedding planner in the industrial heartland of Aichi with a $37 million market cap; Tokyo Ichiban Foods Co Ltd, which operates 75 blowfish restaurants; and P-Ban.com Corp, a maker of circuit boards with 28 employees. Do these stocks really represent the best of Japan’s business world?
Reaction among investors has been less than kind. “The Sinking of the Tokyo Stock Exchange,” declared the cover of the weekly magazine business Toyo Keizai, asking rhetorically: “Is this good enough, Japanese stocks?” In other words: when nearly everyone is a Prime stock, no one is.
There’s a feeling that the restructuring is a missed opportunity that won’t soon come again. The plan began as a grand vision to overhaul Tokyo’s confusing, overlapping market structure and reduce bloat. Investors had complained that the benchmark Topix index contains too many companies.
Until Prime, the Topix was made up of the companies on the TSE’s First Section, as the top tier of firms was known. Saying that you (or your recently graduated son or daughter) work at an ichibu jojo kigyo became synonymous with success — the equivalent of being employed at a Fortune 500 company, at least before everyone wanted to work for a Silicon Valley startup.

—Bloomberg