Japan: A game of catch-up
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Japan: A game of catch-up

After a disastrous few years, Japanese securities houses have begun to rediscover how to make money in international business. They are cutting costs, building up proprietary trading operations and taking advantage of the demand from Japanese retail investors for foreign bonds. But can they ever catch up with their US and European rivals? Garry Evans reports.

Daiwa Securities has gone through an irritating few months. When the $1 billion bond-trading loss at Daiwa Bank's New York branch became public in October, the securities firm began to feel the repercussions too. But the two firms are not in any way connected. In fact, Daiwa Bank used to be a part of, and is still close to, Nomura, Daiwa Securities' greatest rival.

In London, Daiwa Securities' officials had to chase away cameramen from the BBC mistakingly camped outside the firm's eye-catching building in King William Street. One senior executive of Daiwa Securities recalls that he received many letters from business contacts commiserating with him on the scandal. "I don't know how to respond," he laments. "If I write back, these people will be so embarrassed they'll never do business with me again."

Such annoyances aside, Daiwa Securities has every reason to feel pleased with its progress over the past 12 months. Profits from the London operation reached £9.4 million ($15 million) in the April-to-September half-year, according to figures published by the Nihon Keizai Shimbun newspaper. Says Alex Monnas, deputy chief executive of Daiwa Europe: "Over the past five years, we have slowly been building a portfolio of enduring businesses in London.

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