Japan intends to cut rules for quarterly business reporting

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A rule requiring Japanese companies to report their performance to the government every three months is likely to be scrapped, Yomiuri Shimbun has learned.

Companies that raise funds from investors by issuing stocks or bonds are required to submit quarterly reports to the Treasury Department.

But the business community has called for a review of the practice, citing the heavy administrative burden as it overlaps with quarterly financial briefings that listed companies are required to file on exchanges such as the Tokyo Stock Exchange.

It has also been claimed that quarterly reports could encourage companies to make short-term profits.

Since taking office, Prime Minister Fumio Kishida has vowed to review corporate disclosure regulations as one of the pillars of his “new form of capitalism” economic policy, believing the current regulations have led to undesirable corporate behavior that has been seen to compromise profits is in the foreground.

The Financial Services Agency plans to table a bill to revise the Financial Instruments and Stock Exchange Act at the ordinary state legislature no earlier than next year, aiming to scrap the rule for companies to publish quarterly disclosure reports by April 2024.

Under the planned overhaul, listed companies would continue to submit quarterly financial briefings to stock exchanges, but the government is considering whether the reports should be voluntary.

The quarterly reports that companies are currently required to submit to the government are in addition to the annual and semi-annual reports.

For companies whose fiscal year ends in March, the reports contain the cumulative sales and profits as of the end of June and December, as well as the status of assets and liabilities. False statements will be sanctioned.

The government intends to reduce its exposure to information disclosure as business operations expand as companies fight decarbonization and respond to human rights issues.

In Europe, the UK and France have eliminated disclosure requirements for listed companies, and Germany has also narrowed down the companies subject to such requirements.

THE YOMIURI SHIMBUN (JAPAN)/ASIA NEWS NETWORK

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