The implementation date will be determined by the middle of 2018 and is susceptible to changes due to discussions with market participants and “other matters”.
In-scope exchanges include the Tokyo Stock Exchange, Osaka Exchange, Nagoya Stock Exchange, Fukuoka Stock Exchange, and the Sapporo Securities Exchange.
SBI Japannext and Chi-X Japan will also shorten their cycles in line with these exchanges.
This decision to shorten the cycle is based on a Japanese work group report on the possibility of a shorter settlement cycle published in June 2016.
In a statement on the initial timeline, the Japan Exchange Group said: “This decision was made in recognition of the urgency and importance of realising a secure and efficient securities settlement system for enhancing the international competitiveness of Japan’s securities market.”
It added: “The tentative implementation period is scheduled for April or May 2019, as described in the final report.”
A move to T+2 has the advantage of bringing Japan in line with the major US and EU markets, among others.
North American securities markets cut their settlement cycles from T+3 to T+2 on 5 September.
Affected securities include equities and corporate and municipal bonds, and unit investment trust (UIT) trades in the US, Canada and Mexico, Peru and Argentina.
The EU moved to a T+2 settlement cycle in 2014.
The transition aims to reducing operational and systemic risks by forcing securities through the market infrastructure quicker, thereby allowing counterparties to avoid trade failures.