The J-Com incident refers to the data-entry error that occurred on December 8, 2005, on the Tokyo Stock Exchange, when a Mizuho Securities trader sold 610,000 J-Com shares at 1 yen instead of one share at 610,000 yen, an order the exchange’s system could not cancel in time. The price first fell to its lower limit of 572,000 yen before suddenly reversing to its upper limit of 772,000 yen on the same day, according to the joint statement issued by the Tokyo Stock Exchange (TSE) and the Japan Securities Clearing Corporation (JSCC) on December 12, 2005.
What happened on December 8, 2005, according to official statements
On the day of J-Com’s initial public offering, a recruitment firm, the opening price was set at 672,000 yen. The joint statement from the TSE and the JSCC then describes an unusual price movement triggered by a massive sell order from Mizuho Securities: “a large sell order by Mizuho Securities Co. caused the price of J-COM shares to drop to 572,000 yen, the lower share price limit, after the initial price was determined at 672,000 yen. The share price then reversed and suddenly rose to the upper limit of 772,000 yen.” The statement therefore establishes two distinct facts: the initial drop to the lower limit, then the reversal to the upper limit, all within a single trading session.
| Moment of the session | Price (yen) | Date |
|---|---|---|
| Opening price | 672,000 | December 8, 2005 |
| Lower limit reached | 572,000 | December 8, 2005 |
| Upper limit reached | 772,000 | December 8, 2005 |
| Price intended by the trader (original order) | 610,000 | December 8, 2005 |
The data-entry error confirmed by the Japanese regulator
The Japanese Financial Services Agency (FSA) published an administrative sanction against Mizuho Securities on December 22, 2005, which specifies the exact nature of the error. The trader intended to sell one J-Com share at a sale price (bid) of 610,000 yen, but reversed the quantity and price fields on the order-entry terminal, resulting in a sell order for 610,000 shares at 1 yen each. The original FSA statement, in Japanese, describes this reversal of the quantity and price fields during entry on Mizuho’s terminal, referring to the erroneous order of 610,000 shares at 1 yen: FSA statement of December 22, 2005. This volume vastly exceeded the total number of J-Com shares outstanding, which mechanically amplified the error’s impact on the market.
Why the erroneous order could not be cancelled
Mizuho attempted to cancel the order shortly after placing it, but the Tokyo Stock Exchange acknowledged in its investigation report of January 31, 2006, that a software defect in its stock and convertible bond trading system had prevented part of the cancellations from executing correctly. The original report, in Japanese, explains that a malfunction in the processing of cancellations related to orders deemed executed prevented the effective cancellation of the order: Tokyo Stock Exchange investigation report of January 31, 2006. It is this documented technical failure, acknowledged by the exchange itself, that allowed the erroneous order to produce its effects on the price, rather than the data-entry error alone.
How Japanese courts split the responsibility
Mizuho filed a lawsuit against the Tokyo Stock Exchange seeking compensation for the losses incurred, estimated at several tens of billions of yen. The Tokyo High Court ruled that responsibility should be shared, finding that Mizuho should bear at least 30 percent of the damages due to failings in its own order management system, according to Finextra’s report: “the higher court accepted that Mizuho should shoulder at least 30% of the blame for the incident due to failings in its trading order management system.” Japan’s Supreme Court definitively closed the case on September 4, 2015, by rejecting the appeals from both parties, as stated in Mizuho Securities’ announcement: “In its decision, the Supreme Court rejected both our final appeal and our petition for final appeal. It also rejected both TSE’s incidental-final appeal and incidental petition for final appeal.”
The corrective measures announced by Mizuho
On January 20, 2006, Mizuho Securities published a corrective action plan intended to prevent such an incident from recurring, explicitly acknowledging that its data-entry error had disrupted the market. The original statement, in Japanese, refers to the erroneous order on J-Com shares from the preceding December 8 and the resulting market disruption: Mizuho Securities corrective action plan of January 20, 2006. The plan provided for a strict separation between sales functions and order placement, systematic verification of entries by a second person, and the creation of a dedicated room for real-time transaction monitoring.
What these documents do not establish
The official statements describe the technical mechanism and the judicial split of responsibility, but they do not detail the trader’s precise motivations at the moment of entry, nor a minute-by-minute chronology of market reactions that day. Accounts circulating on forums or in popular articles claiming to reconstruct this exact sequence are not based on the primary sources cited here and should be read with this reservation in mind. To understand how other technical failures have affected stock markets, see also this article on the Knight Capital software glitch, which cost 460 million dollars in 45 minutes in 2012, or this article on the US market-wide circuit breaker (MWCB), which details the mechanisms designed since then to halt trading during extreme price swings. A parallel also exists on the order side itself: reading about the stop-limit order shows how an order can remain unexecuted despite its protective logic, in contrast to the complete and immediate execution of Mizuho’s erroneous order.
Frequently asked questions about the J-Com incident
What exactly is the J-Com incident?
It refers to the data-entry error made on December 8, 2005, by a Mizuho Securities trader, who reversed the price and quantity of a sell order on J-Com shares on the Tokyo Stock Exchange, selling 610,000 shares at 1 yen instead of one share at 610,000 yen.
Why couldn’t the order be cancelled in time?
The Tokyo Stock Exchange acknowledged in its investigation report that a defect in its stock trading system had prevented part of the cancellation process from executing correctly, which allowed the erroneous order to produce its effects on the price.
Who was found responsible for the incident?
Japanese courts split the responsibility: the Tokyo High Court found that Mizuho should bear at least 30 percent of the damages due to failings in its own order management system, and the Supreme Court upheld this ruling in 2015 by rejecting the appeals from both parties.
What measures were taken after the incident?
Mizuho Securities announced a corrective action plan in January 2006 that provided for the separation of sales functions from order placement, verification of entries by a second person, and the creation of a transaction monitoring room, in order to reduce the risk of such an error recurring.