Not So Big In Japan

Nomura announced big cuts

Image source: Naoki Kim, Evgeny Karandaev - Shutterstock

What's going on?

Nomura, Japan’s largest investment bank and brokerage, announced plans on Thursday to cut $1 billion in costs and slash at least 20% of its Japanese branches in a move to turn around the struggling business.

What does this mean?

Nomura made a loss of $900 million for the last nine months of 2018 – its worst performance since the 2008 financial crisis. Areas now facing the chop include the bank’s support services and its business in trading bonds and currency for European and US clients. The Japanese giant is instead looking to make more money selling new bonds for companies in America and China; it missed out on Tencent’s blockbuster sale this week, for example.

Why should I care?

For markets: The emperor’s new clothes?

Lower market volatility and tougher regulations may be to blame for denting Nomura’s hopes of challenging the likes of JPMorgan Chase and Goldman Sachs on the world stage. And the closure of regional Japanese branches, a supposedly sacrosanct part of Nomura’s operations, may have come as a shock: the stock fell 2% on Thursday. An upcoming 10-day holiday in honor of Japan’s outgoing emperor, meanwhile, has the country’s banks braced for a surge in cash withdrawals and currency movements as businesses shut up shop. The Japanese yen, a “safe haven” investment, is seen as particularly prone to sudden swings in price – back in January, its value flew up 3% overnight after Apple’s unexpected profit warning.

The bigger picture: SoftBank stiffens its resolve.

Japan has struggled for decades with low economic growth, despite the best efforts of its central bank. Nevertheless, there remain some bright patches. Telecoms giant SoftBank is reportedly looking to continue the success of its $100 billion tech-focused Vision Fund by raising another $15 billion from investors this year – and another $100 billion every two or three years after that. With a bumper round of technology stock market listings coming up in 2019, including the likes of Uber and Airbnb, SoftBank is understandably keen to rattle the tin.

Originally posted as part of the Finimize daily email.

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