Tokyo stocks jumped to five-year closing highs after trade started in mid-afternoon, but traders and analysts said the suspension may be a setback for the bourse's ambition to go public as early as next fiscal year starting in April.
The suspension affected all cash stocks of more than 2,300 issues and convertible bonds on the world's second-biggest market, which is worth some $4 trillion and whose daily transaction turnover reached $13.2 billion in the six months to September 30, up 16.5 percent from a year earlier.
"This is unbelievable. It almost made me laugh," said Yoshihiko Kosuga, deputy general manager at Mizuho Investors Securities.
"They (the TSE) should be grateful that they aren't listed yet. The problem would have been bigger if they were public."
The outage was worse than the last major one in 1997, when a system problem forced the TSE to suspend morning trading.
The latest halt occurred at a time when optimism over Japan's economy and corporate earnings outlook had caused a spike in trading volume and lifted the country's stock prices. The recent surge in volume had forced the TSE to upgrade its trading system.
TSE managing director Tomio Amano told reporters that the suspension was caused by a problem in trading system software developed by electronics maker Fujitsu Ltd and that the bourse had no back-up solution for such glitches.
Asked whether Fujitsu was entirely at fault, Amano said: "We should investigate thoroughly and then check with the contract."
"If the software (Fujitsu installed) failed to meet our requirements, we may consider claiming compensation," he said.
The regulatory Financial Services Agency, which is due to make a decision on the TSE listing plan, told the bourse to make a formal report on the system problem. The new financial services minister, Kaoru Yosano, expressed deep regret over the trouble.
Shares in Fujitsu, Japan's largest software services provider, fell 1.6 percent to 752 yen.
The system trouble could weigh on Fujitsu's software services business, which accounts for about 40 percent of its revenue. A turnaround in the long-battered segment led to a 40 percent jump in the company's quarterly net profit announced last week.
Fujitsu declined to comment on any possible compensation or impact on its earnings.
The TSE started trading at 0430 GMT for a shortened 90-minute session. The broader TOPIX index rose 1.96 percent to 1,473.02, its highest close since October 2000.
Higher trading volume for Japanese shares in recent months thanks to optimism about the economy had raised concerns that the exchange could be flooded with more orders than it could process.
To cope with the increased trading volume, which hit a record high in late September, the bourse in October bolstered its order-processing capacity by 21 percent to a maximum 7.5 million trade orders a day to avoid system problems.
But the upgrade backfired by apparently helping to trigger the technical trouble. The TSE said it would bring forward its plan to boost the capacity to 9 million orders by February next year, although it gave no specific new date.