The Tokyo Stock Exchange (TSE) has set up a study group to discuss the possibility of allowing SPACs, or special purpose acquisition companies. The vehicles raise money in an initial public offering (IPO), put it in a trust and then aim to merge with a private company and take it public.

"I think it's possible to introduce a SPAC listing scheme (in Japan)," Hiromi Yamaji told Reuters in an interview.

"But we'll need our own rules to protect investors," he said, adding that a U.S.-style SPAC regime wouldn't work in Japan due to a limited pool of investors willing to take risks in startups.

Rival Asian financial hubs Singapore and Hong Kong have recently opened up to SPACs, though the pace of capital raising through SPACs in the U.S. has fizzled out due partly to a regulatory crackdown.

Yamaji said how to involve institutional investors in the SPAC framework would be key to making it work in Japan. The TSE's study group is likely to compile a report in a few months wrapping up the current discussions, he said.

From the perspectives of startups, it will be better to have diversified fund-raising routes including SPACs, Yamaji said.

The TSE, which is owned by Japan Exchange Group Inc, discussed a potential SPAC scheme back in 2008, but concluded at that time that there would be little demand for such vehicles in Japan.

The SPAC talks revived last year as the government placed support for startups as one of policy initiatives to promote innovation.

Japan has less than a dozen unicorns - startups with a valuation in excess of $1 billion - partly because the relaxed listing criteria of the Tokyo bourse's emerging market section allows startups to go public in their early stages.

(Additional reporting by Mayu Sakoda,; Daniel Leussink, Scott Murdoch and Alun John; Editing by Kim Coghill)

By Makiko Yamazaki and Yuki Nitta