Spurred by market deregulation, J.P. Morgan & Co. is rapidly expanding its equity-related operations in Japan, including fund management and advisory services.

As part of the buildup Morgan this year moved Thomas Reagan, its top Asian equities specialist, to Tokyo from Hong Kong to spearhead the effort. The bank expects to have 50 traders and analysts in place by yearend, up from four 12 months ago. Last month it signed an agreement to acquire a seat on the Tokyo Stock Exchange from Daika Securities Co.

Shuri Fukunaga, a spokeswoman for Morgan in Tokyo, said the company's buildup in global equities activities, combined with deregulation and a growing need for corporate restructurings in Japan, were the main reasons behind the quick Japanese expansion.

Japan's so-called Big Bang "will increasingly enhance the opportunities for us to provide sophisticated hedging solutions in Japan" such as equity derivatives, she said.

She added that Tokyo, the world's second-largest equity market, was also a "critical link that completes J.P. Morgan's global loop" in equities.

Since last year Japanese pension funds under management at J.P. Morgan Trust Bank Ltd., one of nine foreign-owned trust banks in Japan, have more then doubled to $783 million, from $321 million. Observers say Morgan and other foreign trust banks will rapidly increase their activities as Japanese pension funds seek to diversify and gain higher yields.

Japan is one of the last major industrialized countries to ease restrictions on foreign financial firms and allow a broader range of financial instruments. As a result, some foreign banks and securities firms are gearing up in areas such as capital markets and fund management.

Swiss Bank Corp., for example, last month struck an alliance with Long Term Credit Bank of Japan to set up an investment banking and asset management business, the first such deal between major Japanese and non- Japanese banks.

BankAmerica Corp., Citicorp, Morgan, Chase Manhattan Corp., and Bankers Trust New York Corp. are among the most prominent U.S. banks in Japan. Several U.S. regional banks also have smaller, more specialized activities in Tokyo.

Citibank, with $17 billion of assets in Japan, is the biggest U.S. bank in Japan and the only one that has sought to develop retail banking. Other banks, like Chase, Morgan, and Bankers Trust, have concentrated mainly on capital markets, corporate finance, securities custody, and sales of distressed assets. Smaller banks like CoreStates Financial Corp. have focused on specialized activities such as funds transfers and processing.

By and large, however, U.S. banks have remained extremely cautious about expanding in Japan.

"Japan is a hard place to do business, and the cost of joining the club can be pretty high," said one source, who declined to be identified.

Spokesmen at Chase and Bankers Trust would not comment on their own banks' plans. Bankers Trust recently agreed to dispose of billions of dollars in problem loans for Nippon Credit Bank Ltd.

Chase, which employs 600 people in Japan, is a major player in the foreign exchange and swaps market in Tokyo. The bank runs most of its operations through Chase Securities Japan Ltd.'s branches in Osaka and Tokyo, and Chase Trust Bank Ltd.

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