“Three years ago, Japan’s ‘Big Bang’ financial reform fired a starting gun that stampeded Merrill Lynch’s thundering herd into Tokyo. Merrill’s goal was bold: transform a nation of savers into a nation of investors, and, along the way, make an American brokerage firm a big player in Japan,” writes James Brooke in today’s New York Times.

“Today, the bulls are tiptoeing out the door, taking career-saving assignments in London or New York or buyouts in time for Christmas in Vail. After losing $600 million in three years, the retail operation faces major surgery. The surgeon, G. Kelly Martin, president of Merrill’s International Private Client Group, arrived in Tokyo this week.”

” ‘We were the only good-news story in 1998 in Japan,’ John P. Sievwright said wistfully as he prepared to depart on Friday after four years as Merrill’s chief executive here.”

“The pruning of what Merrill had optimistically called Project Blossom in the spring of 1998 is a tale that revolves partly around American hubris and partly around enduring malaise in Japan, which is stumbling into its fourth recession in a decade.”

“While Merrill made its fair share of mistakes here, it was stuck trying to make water run uphill. In 20 months, Tokyo’s main stock market index has fallen 50 percent. The profits of Japanese brokerage firms have plunged, forcing them into a wave of mergers. Most foreign securities companies are giving up the game of calling the bottom and are closing their retail brokerage outlets.”

” ‘If we had seen the stock market going up 5 percent a year for the last three years,’ said Mr. Sievwright, ‘we wouldn’t be here having this conversation.’ “

“American firms are also cutting back here because Japan’s near-term prospects are bleak. After more than half of the major companies on the Tokyo Stock Exchange reported lower profits or bigger losses for the first half, an article in Nihon Kezai predicted that aggregate profits would plunge 74 percent for the year.”

“For Merrill, the retrenchment represents a second failed bid to win over Japan’s investors. An earlier attempt was abandoned in 1993.”

” ‘They thought they were going to come sweeping in and bring the gospel,’ said James C. Abegglen, an American economist who has worked here for half a century and was an adviser to Merrill in the early 1990’s. ‘Well, the heathen didn’t want to be converted.’ “