Japanese financial regulators have started to crack down on insider trading, an illegal practice where the underwriters of new share issues have been provide advance information to customers. The acknowledgment of the apparently widespread illegal practice has further weakened confidence in the world's second-largest stock market.

In addition to insider trading, scandals such as fraudulent accounting at AIJ Investment Advisors and book-cooking at Olympus Corporation, each hiding losses of over one billion dollars, have caused foreign fund managers to shy away from investments in the already sluggish Japanese equity market.

"There are some deep-rooted issues," said Financial Services Minister Tadahiro Matsuhita at a press conference last week. "The Financial Services Agency is responding severely and appropriately given the framework and economic conditions, But you can never say you've done enough."