TOKYO, December 25: US powerhouse Merrill Lynch and Co Inc said on Thursday it is considering forming a retail brokerage unit in Japan -- a lucrative market with an estimated 1,200 trillion yen ($9.23 trillion) in individual assets.

"Over a long period of time, we have considered many alternatives for entering into the retail business in Japan," Merrill Lynch Japan, a unit of the US parent, said.

"We believe this may be an appropriate time for us to seriously explore opportunities available in Japan," it said in a statement.

Merrill said it may hire current and former Yamaichi Securities employees for the new venture and take over offices currently occupied by the failed Japanese brokerage but declined to confirm details. The financial daily Nihon Keizai Shimbun reported that the new brokerage would hire 2,000 employees from Yamaichi and rent the premises of 50 Yamaichi branches across Japan.

Merrill declined to confirm the numbers, but added that should the new company be created, it hoped that it could clinch the accounts of former Yamaichi clients.

The entry by Merrill into Japan's retail securities business could threaten domestic brokerages -- already stung by a financial scandal and several bankruptcies -- and may spur a reorganisation of the industry ahead of the nation's "Big Bang" financial deregulation, analysts said.

Merrill said, however, that "there will be a number of complex issues" which it will need to solve ahead of the move.

"We will maintain close contact with regulatory authorities as we are seriously considering this opportunity," it said. Japanese media reported that the new brokerage would start operations in May 1998 and would focus on retail operations -- selling foreign and domestic equities, bonds and investment trusts to individual investors.

The unit would become the first foreign brokerage to offer services to individual Japanese investors in addition to institutional and corporate investors, they said.

The unit would be wholly owned by the US parent, Japanese media reported.Foreign securities houses here, such as Merrill Lynch Japan, mainly deal only with financial institutions and corporate clients.

The new brokerage would be a completely separate domestic entity for Merrill Lynch, the Nihon Keizai said.

With the acquisition of office space and staff, the new company would be comparable in size to Japan's so-called second-tier brokerages, which follow the three largest brokerages Nomura Securities Co Ltd, Daiwa Securities Co Ltd and Nikko Securities Co Ltd.

Yamaichi, the fourth-largest broker, said on November 24 that it would go out of business after a short-term liquidity crunch and revelations of hidden liabilities.

It is now looking for companies to hire its employees.

Merrill Lynch Japan also said it was still considering a proposal made by Sanwa Bank Ltd about a possible joint investment in Yamaichi Investment Trust Management Co Ltd, a mutual-fund unit of Yamaichi. "We are still considering Sanwa's proposal and no decision has been made yet," a Merrill Lynch spokesman said, adding that the Sanwa proposal and plans for its new brokerage unit were separate.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.