Yamaichi to sack London staff after losses

Yamaichi, the smallest of the so-called "big four" Japanese broking houses, said yesterday it had suspended 50 staff on full pay after "significant losses" in its London operation. The job cuts that are likely to result from the move represent the loss of almost one in seven of the broker's securities staff in London, an embarrassing reversal of its global ambitions.

The retreat in London follows similar withdrawals from other European markets, including Madrid and Berlin. It also comes after a humiliating mass resignation by the broker's top brass in Tokyo following pay-offs to racketeers.

Yamaichi is suspected of paying 79 million yen (pounds 410,000) to Ryuichi Koike, the corporate racketeer at the heart of a financial scandal which has also ensnared Nomura Securities and Dai-Ichi Kangyo Bank. More than a dozen people have been arrested in the affair, which involved bribing racketeers to prevent them disrupting annual meetings.

Yamaichi's problems in London stem from a costly bid by the broker to follow its Japanese rivals in a programme of "globalisation", a planned diversification out of their huge but stagnant domestic market.

Yamaichi is much smaller than rivals Nomura, Nikko and Daiwa, which are understood to have taken much more seriously their international expansion plans. While this year's losses may have proved the final straw, the performance of the London operation is thought to have been a problem for many years.

"It is a process of the accumulation of losses over a long period of time," a spokesman said. He added that job cuts were likely to be across the board. Yamaichi refused to give details on those involved, but confirmed the cuts were likely to go beyond junior staff and would involve some of the 40 Japanese staff in London. The broker employs 340 staff in its securities operation.

No specific areas are being targeted by the broker and it said it intended to remain involved in the origination, trading and sales of both equities and bonds. An escalation of costs together with poor trading meant a reduction in the London office was inevitable, the broker said.

The suspensions, described yesterday by one rival as a way for Yamaichi to save some face, will allow one month of consultation to determine the exact number of redundancies which are likely to take place at the end of September.

In June, the broker announced the closure of its futures and options unit in London, with the loss of 15 jobs. It cited tougher competition and shrinking margins. It was not clear yesterday whether the cuts at Yamaichi would represent the start of a larger scale clear-out of staff in the City.

It is thought more likely, however, that the reining in of the Japanese brokers' overseas operations is a reflection of the profound problems facing the financial sector in Tokyo.

After six years of recession, and faced with astronomic bad debts after the 1980s property boom, the government has stepped in with proposals for Japan's own Big Bang, a radical overhaul of the whole financial system designed to break down rigid barriers between different types of financial institution and restore Tokyo's competitiveness.

Although Tokyo has been rocked by the pay-off scandal, many believe the government and financial institutions committed a greater crime by allowing the 1980s asset bubble to spin out of control before mishandling its collapse. Between 1990 and 1995 Japan was stripped of about pounds 6 trillion of assets, more than the economic loss it suffered during the Second World War. That has threatened Tokyo's position as a world financial centre.

In an effort to learn how to compete more competitively, Japanese banks and brokers have been scrambling to forge co-operative links with foreign partners. Swiss Bank Corporation and Japan's Long Term Credit Bank have taken stakes in each other. Nikko has formed a joint venture with Smith Barney, the American broker. Barclays and Bankers Trust are talking about swapping stakes with Takushoku Bank and Nippon Credit Bank respectively and closer links between International Bank of Japan and Deutsche Bank are expected.