Yamaichi kept ¥264.8B off the books — Japan's biggest failure since 1945

Yamaichi Securities, founded in 1897, was the oldest of Japan's four dominant brokerage houses, handling 4–6% of all Japanese securities transactions. It carried bad debts from the speculative lending of the late 1980s, had lost trust in 1991 over a scandal of compensating favoured clients for losses, and in 1997 eight former executives were arrested over benefits given to corporate racketeers. On 19 November 1997 its shares fell to ¥58; on 21 November Moody's cut its debt below investment grade, and its ability to raise capital was gone.

On 22 November it emerged that Yamaichi held ¥264.8 billion — about $2.2 billion — of liabilities that had never appeared on its balance sheet, channelled through offshore paper companies. In the early hours of 24 November the board decided to apply for closure of operations, with ¥3.5 trillion — about $28 billion — of liabilities: Japan's biggest corporate failure since World War II. The Finance Ministry insisted the firm was not technically insolvent, citing reported net worth of ¥430 billion at end-September, roughly ¥100 billion once the hidden liabilities were counted.

The state protected the clients, not the firm. Bank of Japan governor Yasuo Matsushita announced special unsecured, unlimited bridge lending so customer assets could be returned; Finance Minister Hiroshi Mitsuzuka said every policy option, including public funds, was on the table. About 82,000 customers held roughly $190 billion of assets with the broker; large withdrawals of those assets had been the final trigger. It came in a month that also took Sanyo Securities and Hokkaido Takushoku Bank, the crisis that broke Japan's no-failure myth and set the terms of its deflationary decade.