Merrill Lynch Japan Securities Co. said Wednesday it will drastically reduce its retail brokerage business in Japan, closing 20 of its 28 branches.

The remaining branches will be spread through Tokyo, Osaka and other large cities.

The Japan unit of Merrill Lynch & Co. of the United States also said it will slash jobs in line with the branch reorganization, set to take place in mid-March.

The company did not say how many jobs will be lost, but industry sources predict the brokerage will eliminate 1,200 jobs from its payroll of 1,700.

"The continued slowing of economic and market conditions . . . has accelerated the need to refocus (retail brokerage operations) for the current business environment," Michael Marks, chairman of Merrill Lynch's International Private Client Group, and Kelly Martin, IPCG's president, said in a statement.

Merrill Lynch's restructuring of its Japanese retail business is consistent with the company's global realignment of its international private client group, it said.

Merrill Lynch Japan, aiming to turn around its loss-making retail business by fiscal 2002 through such measures as cost cutting, plans to reduce annual costs by about three-quarters to 10 billion yen, company sources said.

The company said it will maintain its wholesale business as it is. Existing individual customers' accounts will be transferred to the remaining branches.

Merrill Lynch Japan entered the Japanese brokerage market in 1961 as a wholesale securities service company.

In 1998, the firm became the first foreign brokerage firm to offer retail services, taking over 33 offices and about 2,000 workers from the defunct Yamaichi Securities Co.

Merrill Lynch has tried to differentiate itself from Japanese brokerages, which focus on sales of individual stocks and investment trusts, by offering asset management services to its customers. However, Japan's prolonged economic downturn and the slumping stock market weighed heavily on the firm's profits, forcing it to curtail its retail brokerage business.

Merrill Lynch's decision follows similar moves in the shrinking industry. In December, Societe Generale Group pulled out of the online stock trading business in Japan due to lackluster demand and poor economic circumstances.

Morgan Stanley Dean Witter and Co. said in November it was also withdrawing from Japan's retail brokerage market a mere 10 months after it began the operation in Tokyo.