Merrill Lynch cuts offices in Japan
TOKYO, Japan (CNN) -- Merrill Lynch will shutter offices in Japan as it faces unexpectedly large losses there.
The U.S. brokerage will close six of its 33 retail offices in the country, it said Thursday.
The company made headlines three years ago, when it was the first overseas brokerage to open retail brokerage service in Japan.
A Merrill Lynch spokesman said the company is closing branches in cities where it has more than one office.
"It's an obvious efficiency that we can see," the spokesman said.
Confidence high in 1998 move
New York-based Merrill Lynch was also the first overseas securities company to open an office in Japan. It has been there for more than 35 years.
The world's largest brokerage moved into retail in 1998, when it bought failed Japanese brokerage Yamaichi Securities.
Confidence in Japan was high at the time, as the government launched its "Big Bang" economic reforms. The brokerage's pioneering approach won it enormous goodwill after years of skepticism from overseas companies about Japan's prospects.
But Merrill has struggled to change Japanese attitudes toward investing. The Japanese public tends to save, either through the postal service or low-interest bank accounts, rather than invest.
Japanese investors are also suspicious of brokers, who have a history of selling failed products in Japan.
Merrill promised to bring U.S.-style asset management to Japan. But it has not managed to change Japanese perceptions, up against local brokerages such as Nomura Securities, Japan's biggest.
Losses of $195 million for year
The Big Bang also burst, hurtling Japan into recession. Merrill has been unable to overcome Japan's more than decade-long economic slump.
In Japan, Merrill faces shock pretax losses of $195 million (24 billion yen) for the fiscal year through March. That followed a 22 billion yen loss for the year before.
The office closures come as investment banks and brokerages worldwide trim staff. Goldman Sachs is cutting its worldwide investment-banking staff 12 percent.
Merrill Lynch has 110,000 accounts in Japan, with total assets of $14 billion (1.7 trillion yen). Growth was not great, given the slowdown in stock markets worldwide last year.
On Wednesday, the president of Merrill Lynch Japan Securities, Ron Strauss, said it would break even by the end of calendar 2002.
Merrill characterized shuttering the six offices as a natural real-estate consolidation as it looks to bolster its bottom line. It has not identified the branches because it is still informing staff.
It is expanding its flagship retail office in Tokyo's downtown Otemachi district to 125 brokers over the next four months.
There have been persistent rumors that the bank HSBC Holdings is looking to buy Merrill Lynch, though the companies deny a tie-up is in the offing.
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