The exodus has been going on for about a year, but in the last couple of months it has swelled into a lemming-like migration as the Tokyo Stock Exchange has taken another steep fall. Market turnover has slowed to stalling rate and no one dares to predict when it will improve.
Yesterday the Nikkei 225 Stock Average fell 439 points to 16,548 after a gradual recovery over the last fortnight, and brokers say there is little to stop it sliding back to the 15,000 level during the summer months. Turnover was a mere 180 million shares - at the end of the 1980s it was sometimes 10 times the current level.
So far most of the sayonara parties are for individuals, although the list of foreign firms closing their offices entirely in Tokyo is also getting longer: Hoare Govett Japan, Banca Commerciale Italiana, Chemical New York Capital Corporation, Geneva SA, Morgan Grenfell Japan and Chase Manhattan Securities Japan. None of the firms withdrawing so far is a full member of the Tokyo Stock Exchange. But if things do not improve soon, that might change.
'We are losing USdollars 1m a month here,' said an analyst with one of the larger British stockbroking firms. 'It has come down to a matter of time before the first big firm pulls out - then a lot will follow.'
At the moment there is a fine balance between the bottom-line pain of remaining in Tokyo and the potential political embarrassment of pulling out. Of the 124 firms that are full members of the Tokyo Stock Exchange, 25 are foreign. In 1986 there were only six foreign members. It has taken some determined lobbying by foreign governments to prise the Tokyo exchange open, and these governments will not be amused if the firms they championed cut and run at the first sign of trouble.
So far many foreign securities companies seem determined to stick out the bad times by repatriating as many of their highly paid staff as possible, firing a large proportion of their locally hired employees and working with a skeleton staff. 'There are a lot of empty desks around,' one analyst said.
Compared with the Japanese brokerages, the foreigners are still doing quite well overall: 27 of the 50 foreign firms in Tokyo reported profits for the last fiscal year, compared with only 37 of the 210 Japanese companies. And foreign brokers' share of market turnover has now risen to about 20 per cent - up from about 3 per cent in 1988.
But a large proportion of the profits racked up by the foreigners came from arbitrage, which is dominated by the big American houses and also practised successfully by a handful of French firms. The big losers have been the British firms, which rely more on commission income backed by high-quality company research. Overall the 13 British securities firms had collective pre-tax losses of Yen Y5.4bn (pounds 23.5m).
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