Abe's Cabinet OKs draft law revision to promote "crowd funding"

Prime Minister Shinzo Abe's Cabinet on Friday approved a draft law revision to promote so-called "crowd funding" that would enable startups to raise funds more easily via the Internet, financial services minister Taro Aso said.

A pillar of the revision to the Financial Instruments and Exchange Law is to ease regulations that currently prevent entities other than brokerage houses from serving as intermediaries in transactions of unlisted stocks.

By diversifying fund-raising means for emerging companies struggling to borrow money from banks, Abe's government aims to encourage their development, believing it will help shore up domestic demand and overcome nearly two decades of deflation.

The legal reform "is necessary to strengthen the provision of risk money and boost the confidence in the Japanese financial market," Aso, doubling as finance minister, said at a press conference Friday.

Under the existing regulations, brokerage of unlisted stocks is limited to securities houses capitalized at 50 million yen or more, but the law revision would permit crowd funding to entities capitalized at 10 million yen or more.

Mediation of capital investment for startups by forming a fund would also be permitted to entities capitalized at 5 million yen or more, compared with the current threshold of 10 million yen.

The government's move came as hopes are growing in Japan that crowd funding would alleviate the frustration of many emerging firms faced with funding difficulties in commercializing new business ideas and technologies.