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The Japanese financial regulator has long been concerned about the ease with which individuals can access the stock market. Recently, on July 28, the Tokyo Stock Exchange (TSE) sent an official letter to 270 companies listed on its main board. The exchange urged them to revise their minimum trading lot sizes, specifically to consider a stock split. This proposal arose because purchasing a standard lot of 100 shares from most of these companies required an amount exceeding 500,000 yen (approximately $3,050). According to a survey conducted by the exchange in April, retail investors considered this threshold too high, citing a comfortable amount of around 100,000 yen.

In response to this request, the exchange adopted a comprehensive solution: instead of individual adjustments, it formed a Working Group to Promote Small-Scale Investments. The group will begin its work in October and will analyze the current situation and develop new tools to facilitate market access for retail investors. Materials accompanying the letter demonstrate the success of splits. In the year ending June 30, 276 companies have already completed this operation. Approximately 70% of them set the final lot price within a few hundred thousand yen, and only 2% maintained the minimum transaction size of 500,000 yen or higher, compared to 45% previously.

It is worth noting that these calculations do not apply to foreign securities, REITs, or shares traded on the TOKYO PRO Market. However, even excluding these segments, a consistent trend is evident. Since the exchange's last such request in October 2022, 762 companies across the market have decided to split their shares, indicating the growing popularity of this practice among Japanese issuers.

Recent announcements from Tokyo Electron and Organo are notable examples. The former, a semiconductor equipment manufacturer with a current lot price of 7.72 million yen, will implement a five-fold split effective October 1. The latter, a specialist in water purification systems, has approved a similar split. These steps will likely serve as a benchmark for other companies evaluating the possibility of lowering entry barriers.

From a market logic perspective, lowering the minimum lot size serves several purposes. It allows for a broader shareholder base by attracting funds from households that were previously unable to invest due to high entry requirements. The increased participation of retail investors can also improve liquidity and contribute to long-term price stability. The split itself doesn't affect the fundamental value of a company, but it does make its shares a more accessible instrument for regular investment.

Thus, the Tokyo Stock Exchange's initiative is a well-considered step aimed at gradually changing the structure of participation in the Japanese market. Initial positive results are already noticeable, and the creation of a specialized working group underscores the regulator's commitment to further progress. The October meetings of the working group and the proposed measures should be closely monitored.