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               FACING CRISIS, JAPAN'S OLDEST BROKERAGE TO CLOSE
                                       
      graphic November 23, 1997
     Web posted at: 7:06 p.m. EST (0006 GMT)
     
     TOKYO (Reuters) -- Yamaichi Securities Co. Ltd, Japan'soldest
     brokerage, will shut down, a spokesman said Monday,resulting in the
     country's biggest financial failure since World War II.
     
     Financial sources said a last-ditch review at a meeting ofYamaichi's
     board of directors determined it had no chance ofsurviving a credit
     crunch, shrinking business and high-profile scandals.
     
     The board was to hold a news conference later Monday,the spokesman
     said.
     
     Japanese markets were closed on Monday for a national holiday, but
     international stock markets and the yen were expected to be hit by
     the news of the shutdown amid fears of a domino effect across Japan,
     Asia and possibly beyond.
     
   International markets brace for possible fallout
  
     
     
     International markets were braced for fallout from Asia's latest
     economic crisis, the final chapter in a saga of Japanese corporate
     racketeering that has worldwide implications.
     
     The fear that Japan might be the next Asian domino to fallhas kept
     international monetary officials, already dealing with a crisis in
     South Korea, the world's 11th largest economy, and other Asian
     nations, on edge.
     
     "The initial reaction is likely to be selling pressure onthe yen and
     equity markets and a firmer opening for U.S.Treasuries," said Kirit
     Shah, chief market strategist at Sanwa International in London.
     
     Bank of Japan sources told Reuters a special board meetingwould be
     held on Monday morning on whether to extend specialunsecured loans
     to Yamaichi.
     
     The Finance Ministry and central bank contacted overseasauthorities
     to alleviate global concerns, especially in U.S. and European
     markets.
     
   Third brokerage to collapse in past month
  
     
     
     The Yamaichi crisis follows the collapse in the past monthof
     second-tier brokerage Sanyo Securities Co. Ltd. and10th-ranking
     commercial bank Hokkaido Takushoku Bank.
     
     Finger-pointing has already started over what was behind thecollapse
     in its centenary year of a Japanese household name that has a staff
     of 7,500 at home and 33 branches abroad.
     
     Takeo Nishioka, secretary-general of the main opposition NewFrontier
     Party, said Prime Minister Ryutaro Hashimoto's ruling Liberal
     Democratic Party had not acted decisively enough to ensure financial
     stability in Japan.
     
     "The Yamaichi Securities situation has undermined the trustof
     Japanese investors and international financial markets,"Nishioka
     said on national television.
     
   A financial system in need of reform
  
     
     
     The criticism added up to a unanimous view that Japan'sfinancial
     system was in urgent need of reform, deregulation and closer
     supervision -- and there was more bad news to come.
     
     At its core, the liquidity crunch faced by Yamaichi has beendriven
     by concern that creditors cannot pin down just how large the
     brokerage's potential losses could become, analysts said.
     
     "It's a story of lack of sufficient disclosure andsupervision," said
     James Fiorillo, senior banking analyst at ING Barings in Tokyo.
     
     A Finance Ministry official said on Saturday there weresuspicions of
     vast off-balance sheet liabilities exceeding 200 billion yen ($1.58
     billion) from illegal trading practices.
     
     If that is the extent of the problem, one industry source said that
     a "white knight might be found to pick up at least some of the
     pieces.
     
     But there were worries the numbers may be much larger, withpossibly
     1 trillion yen ($7.9 billion) accumulated fromillegal deals since
     the 1980s.
     
     Copyright 1997 Reuters Limited. All rights reserved.
     
   
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