Yamaichi Securities one of the "Big Four" Japanese brokerage houses, has decided to cease trading following an urgent pre-dawn meeting of its management, news reports said. "Yamaichi applied for finance ministry approval to partially suspend operations from November 25th early this morning," Jiji Press news agency said without quoting sources.
It said Yamaichi was expected to halt all operations except those involving the protection of client assets.
The news of the country's biggest corporate failure since the second World War was also carried by Japan Broadcasting Corp. (NHK) and Kyodo News service, which quoted Yamaichi sources.
The brokerage, whose share price has crashed over the past two weeks, has run up liabilities of more than $25 billion. Its collapse is without parallel in postwar Japan.
The decision set in motion hurried action by the Ministry of Finance and Bank of Japan to ensure an orderly shutdown of Japan's fourth largest brokerage so that it did not cause major turmoil in world markets.
Japanese markets were shut today for a national holiday, but international stock markets and the yen are expected to be hit by the shutdown news amid fears of a domino effect across Japan, Asia and possibly beyond.
With international markets braced for fallout from Asia's latest economic crisis, Yamaichi's Tokyo headquarters was besieged by journalists on hand for the final chapter of the latest saga in Japan's economic woes.
The fear that Japan might be the next Asian domino to fall has kept international monetary officials, already dealing with a crisis in South Korea, the world's 11th largest ecoomy, and other Asian nations, on edge.
The Bank of Japan is expected to extend special unsecured loans worth several billions of dollars to help Yamaichi cope with fund withdrawals. The Finance Minister, Mr Hiroshi Mitsuzuka, said the government was taking all possible steps as promised and that there was no need for concern.
Financial authorities said on Saturday that investigations into Yamaichi unearthed debts of $1.6 billion that were concealed by being placed off the books.
The brokerage, which was saved from collapse in 1965 by government assistance, has suffered from a pay-off scandal involving racketeers who routinely threaten to disrupt shareholders' meetings.
The scandal has led to the arrests of its former president and five other executives.
Yamaichi's collapse follows two major failures of Japanese financial institutions earlier this month and is expected to further shake the industry ahead of the "Tokyo Big Bang" measure to liberalise financial markets.
Sanyo Securities, one of Japan's top 10 brokers, went bankrupt on November 3rd with liabilities of 373.6 billion yen in the first collapse of a Japanese securities house listed on the first section of the Tokyo Stock Exchange (TSE) since the end of the second World War. Hokkaido Takushoku Bank, Japan's 10th-ranked commercial bank, went under on November 17th under a mountain of bad debt, marking the country's worst banking failure since the war.
Yamaichi's trading price has hit rock bottom over the past weeks, falling below the psychologically critical 100-yen mark.
The final blow came Friday when Moody's Investors Service downgraded it to the status of "junk bond". That judgement killed any chance of refinancing for the brokerage.
In early trading in South Korea, shares fell 1.5 per cent, mainly on fears of the effects of the planned IMF bailout but also because of the news from Tokyo.
In Australia there was little change early in the session as dealers waited to see how other markets reacted to the news.
