TOKYO -- The Japanese Parliament has passed legislation to overhaul the financial system by letting banks and brokerages compete in one another's markets.

The measures will revamp 16 of Japan's financial laws, including parts of the 44-year-old securities and exchange law, an analog to the United States' Glass-Steagall Act. The Japanese law has barred banks from underwriting and trading most securities.

Although banks themselves will initially not be allowed to diversify into the securities industry, the reforms paved the way for their subsidiaries to expand into that area.

Long-term-credit banks and foreign-exchange banks will be allowed to start commercial banking operations or merge with other financial institutions. Brokerage houses will be able to enter trust banking or commercial banking areas.

Officials said they expect to put the new laws into effect within a year.

The reforms are expected to have an impact like that of Britain's "Big Bang" deregulation in 1986, analysts said.

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