The final nail was driven into Yamaichi's coffin at an early morning board of directors meeting
who took less than an hour to decide voluntary liquidation was the only answer to a credit
crunch, shrinking business and a racketeer scandal that has left Japan's fourth largest
brokerage under a pile of debt.
Yamaichi said on Monday its assets had fallen by 264.8 billion yen ($2.10 billion) from 3.67
trillion yen ($29.1 billion) as of the end of September.
The failure of Yamaichi dwarfs similar crises that have hit the financial world, including the
1990 closure of New York investment bank Drexel Burnham Lambert.
The Ministry of Finance (MOF) said some of Yamaichi's operations would halt as early as
Tuesday while the Bank of Japan assured depositors their money would be protected.
But the fear that Japan might be the next Asian domino to fall kept international financiers,
already dealing with a crisis in South Korea, the world's 11th largest economy, and other
Asian nations, on edge.
''I think the problem we have seen is perhaps far less than the actual problem. I think the
market is actually expecting more problems to come,'' said Stanley Wong, Treasurer of
Standard Chartered Bank in Hong kong.
In Sydney, David Bassanese, senior economist for Bankers Trust Australia, said Yamaichi's
failure showed Asia's malaise was spreading from Thailand, Malaysia and Indonesia into the
richest parts of the region.
''I think the concern now is that the contagion is spreading into northeast Asia,'' he told
Japanese officials did their best to contain the fallout and assure the world there was no need
for panic.
''We will take all necessary steps to cope with any situation in a bid to maintain stability in the
financial system,'' Finance Minister Hiroshi Mitsuzuka told reporters.
"The case of Yamaichi is a serious matter," he added.
In Vancouver, where Prime Minister Ryutaro Hashimoto arrives for the Asia-Pacific
Economic Cooperation (APEC) meeting later on Monday, his spokesman said the world
should not lose faith in Japan.
''I think Japan's economic fundamentals are in principle still sound,'' spokesman Hiroshi
Hashimoto told RFTV in Vancouver.
The Finance Ministry and central bank have contacted overseas authorities to alleviate global
concerns, especially in U.S. and European markets.
The Yamaichi crisis follows the collapse in the past month of second-tier brokerage Sanyo
Securities Co Ltd and 10th-ranking commercial bank Hokkaido Takushoku Bank.
Yamaichi fell in the centenary year of a Japanese household name that has a staff of 7,500 at
home and in 33 branches abroad.
Critics are unanimous that Japan's financial system is in urgent need of reform, deregulation
and closer supervision.
At its core, the liquidity crunch faced by Yamaichi, had been driven by concern that creditors
could not pin down just how large the brokerage's potential losses could become.
''It's a story of lack of sufficient disclosure and supervision, said James Fiorillo, senior
banking analyst at ING Barings in Tokyo.
A Finance Ministry official said on Saturday there were suspicions of vast off-balance sheet
liabilities exceeding 200 billion yen ($1.58 billion) from illegal trading practices. |
