CNN logo Navigation Infoseek/Big Yellow Pathfinder/Warner Bros Barnes and Noble World banner 4MB upgrade only $49.99 rule FACING CRISIS, JAPAN'S OLDEST BROKERAGE TO CLOSE graphic November 23, 1997 Web posted at: 7:06 p.m. EST (0006 GMT) TOKYO (Reuters) -- Yamaichi Securities Co. Ltd, Japan'soldest brokerage, will shut down, a spokesman said Monday,resulting in the country's biggest financial failure since World War II. Financial sources said a last-ditch review at a meeting ofYamaichi's board of directors determined it had no chance ofsurviving a credit crunch, shrinking business and high-profile scandals. The board was to hold a news conference later Monday,the spokesman said. Japanese markets were closed on Monday for a national holiday, but international stock markets and the yen were expected to be hit by the news of the shutdown amid fears of a domino effect across Japan, Asia and possibly beyond. International markets brace for possible fallout International markets were braced for fallout from Asia's latest economic crisis, the final chapter in a saga of Japanese corporate racketeering that has worldwide implications. The fear that Japan might be the next Asian domino to fallhas kept international monetary officials, already dealing with a crisis in South Korea, the world's 11th largest economy, and other Asian nations, on edge. "The initial reaction is likely to be selling pressure onthe yen and equity markets and a firmer opening for U.S.Treasuries," said Kirit Shah, chief market strategist at Sanwa International in London. Bank of Japan sources told Reuters a special board meetingwould be held on Monday morning on whether to extend specialunsecured loans to Yamaichi. The Finance Ministry and central bank contacted overseasauthorities to alleviate global concerns, especially in U.S. and European markets. Third brokerage to collapse in past month The Yamaichi crisis follows the collapse in the past monthof second-tier brokerage Sanyo Securities Co. Ltd. and10th-ranking commercial bank Hokkaido Takushoku Bank. Finger-pointing has already started over what was behind thecollapse in its centenary year of a Japanese household name that has a staff of 7,500 at home and 33 branches abroad. Takeo Nishioka, secretary-general of the main opposition NewFrontier Party, said Prime Minister Ryutaro Hashimoto's ruling Liberal Democratic Party had not acted decisively enough to ensure financial stability in Japan. "The Yamaichi Securities situation has undermined the trustof Japanese investors and international financial markets,"Nishioka said on national television. A financial system in need of reform The criticism added up to a unanimous view that Japan'sfinancial system was in urgent need of reform, deregulation and closer supervision -- and there was more bad news to come. At its core, the liquidity crunch faced by Yamaichi has beendriven by concern that creditors cannot pin down just how large the brokerage's potential losses could become, analysts said. "It's a story of lack of sufficient disclosure andsupervision," said James Fiorillo, senior banking analyst at ING Barings in Tokyo. A Finance Ministry official said on Saturday there weresuspicions of vast off-balance sheet liabilities exceeding 200 billion yen ($1.58 billion) from illegal trading practices. If that is the extent of the problem, one industry source said that a "white knight might be found to pick up at least some of the pieces. But there were worries the numbers may be much larger, withpossibly 1 trillion yen ($7.9 billion) accumulated fromillegal deals since the 1980s. Copyright 1997 Reuters Limited. All rights reserved. _________________________________________________________________ Infoseek search ____________________ ____ ____ _________________________________________________________________ rule Message Boards Sound off on our message boards You said it... [INLINE] 4MB upgrade only $49.99 rule To the top © 1997 Cable News Network, Inc. All Rights Reserved. Terms under which this service is provided to you.