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Japan's Yamaichi closes
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November 24, 1997: 6:32 a.m. ET
Japan's fourth-largest brokerage latest in line of financial firms to admit defeat
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NEW YORK (CNNfn) - Japan's fourth-largest brokerage, Yamaichi Securities, announced Monday it would shut down, casting a spotlight on the continuing woes of the country's troubled financial sector.
The 100-year-old firm was one of Japan's "Big Four" brokerages. Its failure was Japan's largest financial debacle ever and the third financial institution to close this month.
Yamaichi said that the massive weight of its 3 trillion yen ($23.6 billion) in debt brought about the downfall.
At a news conference, an emotional Shohei Nozawa, president of Yamaichi, wept as he apologized for the company's high-profile failure.
"I express deep regret," he said. "I really feel sorry for our employees. I sincerely hope you will give them support to find new jobs."
The move was anticipated after Japan's finance ministry virtually cut loose Yamaichi over the weekend.
However, the country's central Bank of Japan said Monday it will extend special unsecured loans to Yamaichi in order to protect the assets of the securities firm's clients.
The brokerage house has admitted that it made illegal payoffs to corporate racketeers. It has also suffered a continued loss of business and seen its stock lose 80 percent of its value this year.
But it was Yamaichi's "hidden" debt -- accrued through possibly illegal shifting of losses to protect favored customers' investments -- that proved to be the final nail in the coffin.
Earlier this month, Sanyo Securities Co. Ltd. and commercial bank Hokkaido Takushoku Bank announced their closings.
This may not be the last of financial failures in Japan for the near future, said Russel Jones of Lehman Brothers, Japan.
"I think there is a definite risk that further securities houses and banks will go bankrupt, especially with the Big Bang of deregulation coming in April of next year," he said.
Japan's Finance Minister Hiroshi Mitsuzuka hinted that it would not prop up ailing companies anymore. He said Monday it was necessary to promote restructuring in the financial sector, ensuring full disclosure and stronger supervision to maintain stability.
-- from staff and wire reports
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