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Japan restricts short-selling after stocks plunge

TOKYO - Japan will impose a ban on Tuesday on naked short selling of stocks to try to stabilise Asia's largest bourse amid the worst financial crisis in decades, the finance minister said.

"I decided on the measure because these few days will be critical and stock exchanges are facing risks unless we take quick action," Finance Minister Shoichi Nakagawa told reporters.

The move follows similar crackdowns in the US, Australia and some European markets as regulators acted to defend troubled bourses.

Short sales involve selling borrowed shares in the hope of buying them back later at a cheaper price to make a profit. With naked short-selling, traders sell stocks before even borrowing them.

Critics say short selling has contributed to the recent sharp drops on global markets.

A spokesman for the Tokyo Stock Exchange confirmed that the bourse had "received a request to refrain from (accepting) naked short-selling."

The ban had been due to take effect from November 4 but the government brought forward the move after the Nikkei stock index plunged to a 26-year low.

The Nikkei sank below the key 7,000-point level Tuesday, reaching levels last seen in October 1982 before the economic bubble.