The Tokyo Stock Exchange is set to implement new regulations for companies listed on its prestigious main board. The tighter requirements will force companies to abandon long criticized practices such as cross-shareholdings and cash hoarding.

The proposed reforms will be the largest overhaul ever conducted by the exchange in more than a decade. The overhaul will include tighter listing criteria for the top category. Sources said about 30% of the 2,200 companies listed on the main board do not meet new listing criteria.

After investors called on tougher reforms, the exchange proposed a plan to require a higher profile for companies currently listed on the main board. Officials said that part of the plan is to encourage better corporate governance and profitability standards. Part of the plan will also require companies to submit disclosures in English to attract more foreign investments.

Analysts said that some of the requirements will be tough for companies with small market capitalizations and those largely owned by parent corporations. This includes stricter rules for liquidity such as the requirement of at least $90 million of market capitalization in tradable shares and a 35% or above tradable share ratio.

"Companies previously had little urgency to increase share prices, but the new rules are having a huge impact on their mindset," analysts at consultation company IR Japan said.

Sakai Heavy Industries - a company on the main board - vowed to stay on the top of the list. The company recently launched share buyback programs and adjusted its dividend payout ratio targets to boost its share prices.

"All we can do to meet the market cap requirement is to raise share prices. We now plan to return capital in excess to shareholders instead of hoarding it to boost return on equity, a gauge that investors care about," the company's chief executive officer, Takao Yoshikawa, said.

The Tokyo exchange said that companies that fail to meet the new requirements will still be allowed to submit an application to remain on the prime market. They will be required to submit viable improvement plans that need to be approved.