December 24, 2007 (LPAC)--Japan will abolish the "firewalls" separating its banks and and the rest of its financial system in a radical market reform to be completed in about two years, the Financial Times and AFP reported today. While the likelihood of these measures actually going through in the midst of the ongoing crash of the global financial system is in serious doubt, the insanity of the proposed steps is unquestionable.

In this latest step in its "big bang" financial reform, the Japanese Financial Services Agency will end the ban on creating a comprehensive financial market for banks, stocks, bonds and financial and commodity derivatives, the FSA announced on Dec. 21. The FSA plan is "to strengthen the competitiveness of financial and capital markets" with deregulation and liberalization, the agency announced. This is the biggest financial reform in Japan since deregulation began in 1996, and includes some 60 new deregulation measures. Tokyo, rated only 10th in the world in competitiveness as a financial center by the FT, below Frankfurt and Sydney, Kyodo quoted Financial Services Minister Yoshimi Watanabe as saying: "I hope to implement the plan as soon as possible so that the competitiveness of Japanese markets will revive."

The "firewalls" separating banking and securities companies will be lowered, to let banking, securities and other financial services to cut legal barriers among these institutions. The Finance Ministry will also completely exempt offshore funds from any Japanese taxes, while allowing more deregulation of what can be traded on Japanese markets.