JAPAN'S TWO largest brokerages yesterday reported sharp falls in profit, a result of both the Japanese recession and volatility on the world's financial markets.

Nomura Securities, the country's number one securities house, said domestic - or non-consolidated - profits tumbled by more than a third to 14.2 billion yen (pounds 75m) in the nine months to December.

The brokerage also lost more than pounds 1bn overseas, primarily because of heavy losses on bond trading following the Russian default in August. The bond losses, reported by Nomura in the autumn, lay behind the brokerage's recent decision to cut 2,000 Japanese jobs.

Nomura said: "The international capital market experienced turmoil with widening credit spread caused by turbulent Asian markets coupled with the financial crisis in Russia."

There was more bad news from Daiwa Securities, Japan's number two brokerage. Daiwa said non-consolidated profits fell 94.6 per cent in the nine months to December to 0.3 billion yen (pounds 1.5m). During the same period, Daiwa lost more than pounds 250m overseas.

Daiwa did post a profit for the three months to December, but this was primarily due to one-off gains on the sale of shares in Nippon Telegraph and Telephone Corp, the world's largest phone company, according to analysts. One analyst said: "The key question is whether we'll see a sustained increase in profits. That will require a recovery in market conditions."

Daiwa said it would be taking a 115 billion yen (pounds 600m) charge in the year to March to cover losses at three non-bank affiliates. The brokerage also confirmed plans, announced last year, to cut 20 per cent of its workforce.

Nikko Securities, the country's third-largest brokerage, said it lost 2.66 billion yen (pounds 14m) in the nine months to December, an improvement from the 14.8 billion yen loss reported for the same period a year ago.