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| The Securities Industry |
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| Current State |
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| Earnings Making Rapid Recovery through a Rise in Share Prices |
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The current building of Tokyo Stock Exchange |
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Japanese securities companies have come up against a business slump since the collapse of the economic bubble. Among other things, the departure of individual investors from the stock market progressed, the volume of trading fell considerably, and income from stock brokerage commissions - the source of revenues for securities companies - dropped sharply. Business performance at not only small- and medium-sized securities companies, which were heavily dependent on trading for customers, but also major securities firms deteriorated rapidly. There was also a slump in corporate capital demand, fewer new issues like corporate bonds, and underwriting also flagged. A situation in which securities companies were just barley able to post profits through such measures as proprietary trading (trading stocks on its own account) continued. However, business performance is now rapidly heading towards recovery with the rebound of the stock market of the past few years. For example, a look at Nomura Holdings, Inc.'s business performance for FY2003 shows roughly a sixfold year-on-year increase in current profits. |
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| Securities companies are making a rapid comeback in their business performance. The consolidations and rationalizations that took place in the securities industry over a period of more than ten years is finally starting to bear fruit. |
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| Increase in the Number of Companies; Sharp Decrease in the Number of Workers |
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The number of securities companies, which hit a peak of 272 firms in 1990, kept on declining thereafter until 1993 when it began showing a trend towards increase, and by 1997, the number had grown to 291 securities companies. Today, the figure is hovering at a level in the 280s. The number of securities companies did not end up decreasing in spite of the serious securities slump that was seen throughout the 1990s. In fact, there are now more securities companies in Japan than there were during the bubble economy of the late 1980s. The reason for this is that market entry became easier through the Big Bang financial deregulations, and an increasing number of foreign affiliates as well as companies from other business sectors entered the securities market.
While the number of securities companies has increased, the number of branch offices and people working in the securities field (the total number of board members and employees) has declined on a major scale. The number of branch offices peaked at 3,296 in 1991, after which is began declining. As of the end of 2002, it had decreased to 1,604 branch offices. The number of people working in securities peaked at 161,695 in 1990 and continued to decline thereafter to 91,266 at the end of 2002.
In addition to the shift of investors' interest away from stock trading, severe competition led to markdowns of brokerage commissions and caused the deterioration of business performance among securities companies. Under such circumstances, they were no longer able to maintain a large number of branch offices or employees, leading to the major fall in the number of branch offices and workers despite the increase in the number of companies. Furthermore, more than 80 percent of recent individual investor trading is said to be taking place online. The spread of such trading over the Internet is spurring the further decrease in the number of branch offices and sales staff. |
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