Financial giants Nomura Securities Co. and the Industrial Bank of Japan announced Wednesday that they are to forge links in the areas of personal asset management and financial derivatives to prepare for increased competition in a more deregulated market.

The move would come by the end of the year at the earliest.

The firms will jointly set up two companies; one to develop financial derivative products and the other to manage assets such as the 401K plan, a type of corporate retirement plan popular in the United States and likely to be introduced here in the future.

IBJ would also infuse capital into Nomura Securities Global Investment Advisers, a firm based in the U.S., so that it has a 50 percent capital stake in the company.

The presidents of Nomura and IBJ told a news conference that they wanted to bring their strengths together in a concerted effort that would galvanize their domestic business base ahead of the expected influx of foreign competition.

They added that they will also continue to look into other areas where business tie-ups might be possible. “The start of the ‘Big Bang’ financial deregulation will increase business opportunities but also raise the level of competition, since foreign-based financial companies will be entering the (Japanese) market in earnest,” said Masao Nishimura, head of the IBJ.

Nomura President Junichi Ujiie agreed, saying the two companies decided that it was important to build up their strength as soon as possible in business areas where both rapid growth and profit could be achieved.

He added that it is imperative to maintain a firm footing in the Japanese market before targeting clients abroad. The two new firms have been tentatively named IBJ Nomura Financial Products and Nomura IBJ Investment Services, and Ujiie said he believes the financial products company, with startup capital of several billion yen, will become the largest in Japan.

Both executives said discussions on the union began last fall, when it was agreed that business they could not handle individually would be snapped up by foreign competitors and that they should work together.

They stressed that bringing together IBJ’s knowledge of the credit business and Nomura’s experience in equities would be beneficial to both parties. “We’ll first gather strength (through such tieups,) then we will move into overseas markets — we are not just simply trying to protect ourselves, it’s a form of defense before an attack,” Nishimura said.

The main objective is to make the two new companies operational and profitable as soon as possible, and nothing has been decided regarding any other form of alliance, although studies continue into potential links in other areas of business, he said.

They denied that the joint formation of a financial holding company is currently under consideration.

Wednesday’s move comes as the government prepares to implement the Big Bang reforms through legal revisions, the bulk of which are to take effect from December. Observers have been saying that domestic financial companies are badly positioned to match the advanced services and products offered by foreign financial institutions.

Thus, a new partnership among firms that had long been rivals indicates the extent to which Japanese financial firms have had to review their positions and prepare for deregulation.

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