Merging Tokyo Stock Exchange Group and Osaka Securities Exchange into JPX (2011)

What unification actually delivered

At the core of this merger, one can see a fading sense of what it meant to compete domestically. As exchanges turned into capital-intensive businesses built around systems investment, and as the world was bound together across borders, the structure in which Tokyo and Osaka each built scale separately became progressively harder to sustain. In the decision by two exchanges that had kept their independence for 133 years to fold up their own histories and settle under a single holding company, one sees a switch from the logic of rivalry to the logic of scale. Even so, the gap to the leading overseas exchanges in market capitalization and turnover remained wide after the merger, and unification amounted in part to no more than clearing the starting line of the competition.

The merged JPX went on to complete the division of functions, to build toward a comprehensive exchange, and then to disciplining its listed companies through the JPX-Nikkei 400 and the review of market segments. One can trace how a vessel created to unify market infrastructure came gradually to be used as an apparatus for hardening the governance of listed companies as well. Yet the question of how to raise the appeal of the Japanese market itself, once scale had been secured, remains somewhere the framework of the merger alone cannot answer. How much meaning the decision to bind east and west together retains within international competition depends on the next move to make this market worth choosing.