Japan has signaled plans to strengthen disclosure rules on mergers and acquisitions after a $1.7 billion accounting fraud at Olympus Corp, one of the nation's worst corporate scandals, which involved a series of shady deals.

Financial Services Minister Shozaburo Jimi told reporters that Japan's financial regulator and the Tokyo Stock Exchange would both look for ways of improving disclosure on M&A deals.

As the resolution of this (Olympus) case proceeds, there is a need to check the workings of the system and discuss policies to prevent a recurrence, Jimi told reporters.

Earlier, the Nikkei business daily said the Financial Services Agency would review regulations to bolster disclosure about takeover targets and fees paid to intermediaries.

Jimi declined to give specifics, saying these had yet to be worked through. He did not give a timeframe.

Olympus, a maker of cameras and medical equipment, has been found to have spent millions of dollars on dubious M&A deals as part of an accounting deceit which hid investment losses from investors for 13 years.

The M&A payments included an exorbitant $687 million advisory fee paid mostly to a now-defunct Cayman Islands firm, which did not come to light until former CEO Michael Woodford blew the whistle on the deal after he was sacked two months ago. Worth about a third of the deal value to which it related, it ranks as the world's largest takeover advisory fee on record.

The scandal has sparked criticism of Japan's corporate governance and disclosure practices and has also spurred major political parties to consider possible reforms.

Olympus has lost more than half its market value since the scandal broke in October, when Woodford went public with his concerns over the massive advisory fee and other deals.

Woodford now wants to be reinstated and to replace the entire board with his own slate of candidates. The current board plans to resign soon but wants to choose its own successors before standing down, setting up the prospect of a proxy war over who will lead Olympus out of the crisis.

After restating its accounts this week, Olympus is under pressure to repair its balance sheet by forging an equity alliance, selling assets or raising fresh capital.

The stock fell 5 percent to 989 yen on Friday. It has fallen by nearly one-third since it released its restated accounts and is down more than 60 percent from pre-scandal levels.

Olympus will meet with its creditors on Friday afternoon to discuss its restated accounts and its financial situation.

(Reporting by Noriyuki Hirata and Lisa Twaronite; Writing by Edmund Klamann)